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1-Page Book Summary of Rich Dad Poor Dad

The premise: when growing up, author Robert Kiyosaki had two dads advising him: 1) a Stanford-educated PhD who followed traditional career thinking, was allergic to risk, and was financially illiterate (the Poor Dad, his biological father); 2) a high school dropout who later built a business empire worth many millions and employing thousands (the Rich Dad, his best friend’s father).

The Poor Dad represents the traditional view on work and money - go to school, get a good job and climb the ladder, prize stability over independence, buy a house, and spend money without a clear long-term plan.

  • Most parents belong to this system, so they pass it down to their kids.
  • The traditional view worked better in the 20th century, when strong growth and decades-long employment meant stability was a viable strategy. Nowadays, pensions are rarely guaranteed; job security at a loyal employer is rare; professional education and academic success are no longer guarantees for security.

The Rich Dad represents what was then a more contrarian view - work for salary if you have to, but aim for financial independence; have your money generate more money; and take calculated risks boldly.

Most people adopt the Poor Dad view of finances and life. Even worse, they let money control their life:

  • Fear of not having money makes people work hard.
  • Then once they get a paycheck, greed gets them to buy things they covet.
  • But the joy is short-lived. As they spend unwisely, they have money problems, and the fear of not having money drives back in. They have to go back to work to get the next paycheck.
  • This cycles endlessly, even as their paychecks increase with raises - this is the Rat Race. Money ends up running their lives. They get stuck in jobs they dislike for the sake of money.

Lesson 1: The Rich Don’t Work For Money - Money Works for Them

The rich don’t get rich merely by being paid higher salaries (though this is a great help). They get rich by owning things that make them more money.

Wealthy people use their Income to buy Assets that return more Income. Meanwhile, they minimize their spending on Expenses and buying Liabilities, to have more money to buy more Assets.

People who don’t become rich either spend all their income on expenses, or buy liabilities that increase their expenses but don’t add income.

The key to financial independence is having money that makes more money. You want your money to make enough money that you don’t have to work anymore.

Lesson 2: Buy Assets, Not Liabilities

The key is to buy things that generate income (assets). You do NOT want to buy things that lose money over time or incur large expenses (liabilities).

This is obvious enough. But the most deceptive investments look like assets, but are actually liabilities.

  • Example: buying a house as your primary investment. This viewpoint is problematic because it gets people to buy more house than they really need. A more costly house vacuums up money with high monthly expenses - money that could have been put more profitably elsewhere.

Real assets are businesses that don’t require your active management; stocks, bonds, and other securities; income-generating real estate; and intellectual property generating royalties.

Think about each dollar as your employee that works 24 hours a day tirelessly to make you more money.

The tradeoff between today’s expenses and future income should be clear. Every dollar you spend today is a dollar that does not work for you again, in perpetuity.

Lesson 3: Reduce Taxes through Corporations

Kiyosaki advises that people set up corporations to deduct expenses without paying taxes. (Shortform note: This is a controversial suggestion because it can easily go wrong if you don’t follow tax guidelines.)

The major thing worth noting here is that corporations let you deduct legitimate business expenses pre-tax, instead of paying from post-tax dollars.

Lesson 4: Overcome Your Mental Obstacles

Even if you have Rich Dad goals, you still need to execute your plan. Several common mental obstacles get in the way. We’ll address each one:

Self-doubt

  • In the real world, more than just intelligence and grades is required. Guts, chutzpah, balls, daring, tenacity, grit are different names for the factor that plays a huge role in success.
  • When you recognize a great opportunity, you must have the courage to chase it.

Fear

  • Fear of losing makes you play it safe and avoid opportunities that can have huge upsides and relatively low downsides.
  • Remember that failure will only make you stronger and smarter. Use your failure to inspire yourself to become a winner. Use this thinking to lower the perceived cost of failing.
  • Fear of ostracism prevents people from having nonconsensus opinions. As it relates to finance, it’s in 1) not bucking the consensus traditional way of handling your career and money, 2) keeping up with the Joneses and matching their irresponsible spending. Focus on yourself and your personal goals, regardless of what other people think.

Laziness

  • Counterintuitively, busy people are often the most lazy. They stay busy as a way of avoiding something they don’t want to face.
  • Consider someone who’s moving all the time and brushes off investment opportunities as, “I’m working hard enough as it is, and my boss wants me to do more work. I don’t have the time.”

**Guilt for Feeling...

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Rich Dad Poor Dad Summary Shortform Introduction

Rich Dad, Poor Dad is one of the best-selling financial books in history, selling over 35 million copies since its publication in 1997.

The book doesn’t teach the tactics of getting rich as much as it does the principles: the mindset and high-level strategies that distinguish the wealthy from the hapless.

Unfortunately, as many critics have commented, much of Rich Dad, Poor Dad is flawed. It’s not clear exactly how and when to apply the principles, and less discerning readers can follow the advice and get into trouble. Here are some caveats to set the advice in context.

Rich Dad, Poor Dad doesn’t engage on tactical details that would help people apply the decisions. Kiyosaki says these are out of scope of the book, and maybe details would alienate the popular reader, but it’s a poor excuse. Examples of useful questions to cover:

  • When does it make sense to rent vs buy a house? What will end up being a better financial decision in the long run?
  • How do you assess the risk and return of an investment? How do you compare different investment opportunities to each other?
  • What do the data show on how higher education affects one’s income?

Kiyosaki includes pretty outlandish examples of fantastic investment opportunities. These aren’t necessary for understanding the principles (and we omit most of them from this summary), but they are misleading for the more gullible reader. Here they are, for your understanding:

  • He mentions foreclosed houses worth $75k that he bought at $20k and flipped for $60k within 5 hours of work.
  • He mentions turning an investment on the order of $5,000 into a million dollars while waving away the details.
  • In the most optimistic case, these were cherry-picked, best-case-scenario examples. In a pessimistic case, they were fabrications.

Rich Dad, Poor Dad has some advice that can be interpreted irresponsibly and lead to disaster.

  • Robert Kiyosaki advises people to start their own corporations and pay for expenses pre-tax. He implies that they should be legitimate business expenses,...

Rich Dad Poor Dad Summary Introduction: Rich Dad and Poor Dad

Growing up in Hawaii in the 1950s, Robert Kiyosaki had two dads:

  • Poor Dad: His biological dad, who was well educated (Stanford grad, PhD from Northwestern) but had the traditional mindset: work hard, get a stable job, and be financially conservative. The family did fine, but never made it to financial independence and left little to their kids.
  • Rich Dad: His friend Mike’s dad, who didn’t graduate from high school and had his own financial ups and downs, but eventually built a local business empire and employed thousands. (believed to be Richard Kimi)

Robert Kiyosaki got conflicting advice from both dads on how to manage money, career, and financial risk. Ultimately he saw more wisdom and results in Rich Dad’s advice, and followed in the Rich Dad’s path.

While Robert Kiyosaki might really have had two dads, the more important point is that the two dads are a parable for two types of financial thinking.

  • The Poor Dad represents the standard consensus view on work and money - go to school, get a good job and climb the ladder, prize stability over independence, buy a house, and spend money without a clear long-term plan.
    • The traditional schooling system trains this style of thinking. (Plus, employers have the incentive to keep workers thinking this).
    • Most parents belong to this system, so they pass it down to their kids.
  • The Rich Dad represents what was then a more contrarian view - work for salary if you have to, but aim for financial independence; have your money generate more money; and take calculated risks boldly.

The traditional view worked better in the 20th century, when strong growth and decades-long employment meant stability was a viable strategy. Nowadays, pensions are rarely guaranteed; job security at a loyal employer is rare; professional education and academic success are no longer guarantees for security.

But the traditional thinking is still common. Rich Dad, Poor Dad aims to shake readers out of their current passive...

Rich Dad Poor Dad Summary Learning with Rich Dad

Spread across a few chapters in Rich Dad, Poor Dad, the author narrates his experience with Rich Dad learning the principles of money and work.

Learning the First Lesson

As a 9 year old, Robert Kiyosaki is rejected socially by the rich kids in his public school. He asks his dad, a teacher, how to get rich and make money, but his dad has no satisfactory answer.

He commiserates with his best friend Mike, the only other non-visibly-wealthy kid in the school. They start a misguided idea to melt down metal toothpaste tubes and mint their own nickels. Bemused, Robert’s dad (Poor Dad) suggests they talk to Mike’s dad (Rich Dad), who owns multiple local businesses and seems to be on a good path.

  • Poor Dad also notes that the other apparently rich kids have parents who are just like him - they’re employed by the local plantation, and if the company gets into trouble, they’ll soon have nothing. Rich Dad is different since he seems to be paving his own way.

Rich Dad is busy, but meets with them early in the morning between his regular business meetings with his managers. Rich Dad has this dialogue:

  • “Here’s my offer. I’ll teach you, but not like a teacher in a classroom. Work for me, and I’ll teach you. Don’t work for me, and I won’t teach you. You’ll learn faster if you work. That’s my offer. Take it or leave it.”
  • “Can I ask a question first?” Kiyosaki asks.
  • “No. Take it or leave it. I’m too busy to waste my time. If you can’t be decisive and make up your mind quickly, you’ll never learn to make money. Opportunities come quickly and go quickly. You need to know when to make fast decisions. I just gave you an opportunity that you asked for. Will you take it?”

They take the deal, which means working for 10 cents an hour in Rich Dad’s convenience store. They know this is an unfair wage.

After laboring for 3 hours over 3 weekends, Robert Kiyosaki gets upset and wants to quit. His friend is amused, since Rich Dad expected he’d want to quit, and wanted to meet afterward.

Before the meeting, Poor Dad advises the author to demand what he...

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Rich Dad Poor Dad Summary Lesson 1: The Rich Don’t Work For Money - Money Works for Them

With the narrative over, the rest of the book covers Robert Kiyosaki’s major lessons from Rich Dad.

Most people work 40+ hours a week to earn salaries. Many then take their earnings to 1) buy stuff they think will make them happy (but this is short-lived), 2) save the remainder in a conservative way.

While this ensures some degree of stability, it doesn’t make you rich. And working to earn a pension makes you financially dependent - let alone the risk that pensions won’t be funded decades from now, when you need it.

The counter-intuitive lesson here is this: the rich don’t get rich merely by being paid higher salaries (though this is a great help). They get rich so by owning things. No one on the Forbes billionaire list got there purely with a salary.

(As tech investor Sam Altman says, “You get truly rich by owning things that increase rapidly in value. This can be a piece of a business, real estate, natural resource, intellectual property, or other similar things. But somehow or other, you need to own equity in something, instead of just selling your time. Time only scales linearly.”)

When you work for an employer, you get paid only a fraction of the value that you generate for the employer (otherwise, if the business would go bankrupt). Say your salary is $50k a year. Your work may allow your employer to earn $100k in sales that year, yielding a clean profit after deducting your salary.

  • Even further, if your work isn’t just a pure service but also builds value in the company - say in R&D or product improvement - the value may be many multiples of your salary.

The key to financial independence is having money that makes more money. You want your money to make enough money that you don’t have to work anymore.

Cashflow Diagrams

To picture this, here’s a simple financial diagram from Rich Dad, Poor Dad on how cashflow and balance sheet relate to each other:

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The top box is an income...

Rich Dad Poor Dad Summary Lesson 2: Buy Assets, Not Liabilities

So how do you put your money to work for you? The key is to buy things that generate income (assets). You do NOT want to buy things that lose money over time or incur large expenses (liabilities).

This is obvious enough. But the most deceptive investments look like assets, but are actually liabilities.

Liability: Buying a House as a Primary Residence

In Robert Kiyosaki’s view, the most common mistake is buying a house as a primary residence, and considering it an asset and their primary investment.

His reasoning:

  • You don’t get rental income on your house. Meanwhile, you’re paying large expenses - mortgage, property taxes, upkeep. In steady state, this represents monthly negative cashflow that requires income to compensate. (Shortform note: Kiyosaki basically considers things assets only if they generate cash.)
    • This is why many are stuck in the rat race - someone buys an expensive house. Now she has high monthly expenses, so she has to keep working to sustain it. Yes, the house may be appreciating, but that doesn’t help her high month to month expenses.
  • The money tied up as a down payment, building up home equity, and paying expenses has a large opportunity cost. That money could be better spent on higher returning assets.
  • While real estate can appreciate over the long term, there’s no guarantee of this.
  • Even if real estate appreciates, you get the gain only on liquidation. (Kiyosaki seems to prefer investments with clearer short-term outcomes.)
  • Considering your house as your primary investment causes a few subtle problems:
    • People tend to overspend on housing, depleting money that could be spent on other investments.
    • Because your cash is spent on the house, you never have enough money to think about what to do with it. This prevents building up the financial education to become a sophisticated investor.
    • (Shortform note: also, loading too heavily on your house concentrates risk on your local real estate market. And if you’re subject to groupthink, you’re more likely to...

Rich Dad Poor Dad Summary Lesson 3: Reduce Taxes Through Corporations

(Shortform caveat: we consider this the worst chapter in the book. He doesn’t explain the advice clearly enough to be useful. The advice doesn’t apply to most people’s situations. And taken incorrectly, it could get you into trouble.

Treat none of this as actual tax advice; seek a tax attorney for real advice, and executing some of this too liberally is illegal.)

Why Taxation is Bad

In Rich Dad, Poor Dad, Robert Kiyosaki is clearly strongly against taxation, saying things like:

  • Most people work from January to May just for the government.
  • The Social Security tax is an insidiously large tax, at 15% of wages.
  • Originally in England/early US, taxes were only levied against the rich. They were then extended to middle and lower classes to support a growing government appetite for money, and eventually taxation disproportionately punishes the poor.
  • The biggest bully isn’t your employer or your manager, but the tax man. “The tax man will always take more if you let him.”

Whatever your philosophical bent on taxation, the practical point is that the rich find ways to minimize their tax burden, sometimes paying a lower % of their income than lower tax brackets.

Forming a Corporation

Robert Kiyosaki’s solution? Form your own corporation. Here are its benefits:

Deductions for Expenses

You can pay legitimate business expenses from pre-tax money, rather than post-tax money.

Say you have a business that buys and sells real estate. To travel to see new properties, you can pay for a car. You have business dinners that you can partially expense. You can have board meetings in exotic locations you would have vacationed anyway.

Shortform Explanation

Here’s the financial difference.

  • Say you earn $100 from salary, and after 40% taxes it’s $60 in your pocket. Your car costs $60, so you end up with $0.

  • Say your corporation makes $100 in income. Your car is used for business, so the corporation pays $60 for the car. The corporation then has income of $40. After a 40% tax, this ends up being $24. This profit can then...

Rich Dad Poor Dad Summary Lesson 4: Overcome Your Mental Obstacles

More people have the potential to be happy, but common obstacles get in the way. People who overcome these obstacles get a huge advantage.

Self-Doubt

Self-doubt or lack of self-confidence hold all of us back, to some degree. Some are affected more than others.

In the real world, more than just intelligence and grades is required. Guts, chutzpah, balls, daring, tenacity, grit are different names for the factor that plays a huge role in success.

When you recognize a great opportunity, you must have the courage to chase it.

(Shortform example: a quote from Charlie Munger: “We read a lot. But that’s not enough: You have to have a temperament to grab ideas and do sensible things. Most people don’t grab the right ideas or don’t know what to do with them.”)

Fear

Fear manifests in a lot of ways.

Fear of Losing or Failure

Fear of losing makes you play it safe and avoid opportunities that can have huge upsides and relatively low downsides. Control your fear of losing, money or otherwise. Everyone has fear of losing money, but you have to handle it properly.

  • (Shortform note: This is well rooted in psychology - losses are more painful than equivalent gains. See Kahneman’s Thinking, Fast and Slow.)

School teaches us that mistakes are bad, but this is terrible for real life. Winners aren’t afraid of losing, but losers are. People who avoid failure also avoid success.

Every rich person has lost money. Someone who has never lost money is probably not rich.

Winning requires being unafraid to lose.

Failure will only make you stronger and smarter. Take a loss and make it a win. Use your failure to inspire yourself to become a winner. For winners, losing inspires them. For losers, losing defeats them. Use this sentiment to lower the perceived cost of failing.

Rich Dad says he like Texans, because “when they win, they win big. And when they lose, they lose big, and it’s spectacular. If you’re going to go broke, go big. Don’t admit you went broke over a duplex.” Even though the South lost at the Alamo, they handle failure...

Rich Dad Poor Dad Summary Lesson 5: Keep Learning All the Time

Developing financial intelligence pays off huge returns. If your mind is trained well, you can create enormous wealth in what in the grand scope of things is an instant.

In contrast, an untrained mind can also create poverty that lasts lifetimes.

Robert Kiyosaki believes financial intelligence is made up of four broad areas of expertise:

  • Accounting: financial literacy. Read and understand financial statements.
  • Investing: strategies to use money to make more money. The creative piece.
  • Understanding markets: understand supply and demand. Can you create something that the market wants? Does an investment make sense under current market conditions?
  • Law: use tax advantages and legal protection to build wealth more quickly and reduce risk.

Taken together, financial intelligence allows you to construct creative ways to solve financial problems, vet the ones that are more likely to work, then have the technical ability to execute them.

Consider that spending money on financial intelligence is like buying yourself life - you may save on years of working because of making the right decisions.

Keep Learning, and Learn Quickly

Great opportunities arise in a changing world. (Shortform note: Put technically, markets are less efficient and less at equilibrium when things rapidly change, like through new technology.)

300 years ago, land was the basis of wealth. Then factories and industry became the new basis for wealth. Today, it’s information. And by its nature, information changes more rapidly than land or manufacturing. So it’s even more important to keep learning and adapting, quickly, as it’s ever been.

(Quote from Charlie Munger: “In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time — none, zero. You’d be amazed at how much Warren [Buffett] reads.”)

This doesn’t have to be difficult or intense. Robert Kiyosaki mentions jogging through his neighborhood to spot which houses were listed for sale for longer than others, and making low-ball offers for these houses.

The...

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Rich Dad Poor Dad Summary Lesson 6: How to Get Started

Finally, we’ll end with tips on how to get started on your path to building wealth:

1. Need a reason greater than reality.

Find a deep reason you want to succeed. This is usually a combination of “wants” and “don’t wants.”

Examples: “I don’t want to work all my life. I don’t like being an employee. I hated that my dad missed my football games since he was obsessing about his career. I want to be free to travel the world when I’m young. I want control over my time.”

If you don’t have a strong reason, you won’t make it. It will sound like too much work.

2. Actively choose to be rich and think every day.

Ask, what would a rich person do in this situation?

Invest in educating yourself.

3. Choose friends carefully. Consciously make effort to learn from them.

Don’t seek people for their money. Seek them for their knowledge.

Find someone who has done what you want to do. Take them to lunch.

Don’t listen to frightened people who always advice caution or are pessimistic. They drag you down.

Funnily, rich people have friends who ask them for jobs or a loan, but rarely to ask them how they made money.

4. Master a formula (a way to make money) and then learn a new one.

Formulas lose their potency as they become more common. Keep reinventing yourself and finding new ways to create value.

5. Pay yourself first.

As described above, buy your assets first, and pay the bills last. The pressure will force you to creatively think of ways to generate more money.

Importantly, this doesn’t mean don’t pay bills, or to incur greater debt. Don’t get yourself into debt in the first place.

Don’t dip into your savings or investments. Protect your assets when the going gets tough.

6. Pay your advisors and brokers well.

They provide valuable information and take time to educate you.

Hire professionals who know what they’re talking about, and have skin in the game. An attorney who personally invests in real estate will be more helpful for your real estate matters.

Don’t short-change your brokers. Why would they...