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Rich Dad Poor Dad by Robert T. Kiyosaki.
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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...

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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?...

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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...

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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...

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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...

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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...

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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...

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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...

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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...

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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...

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Table of Contents

  • 1-Page Summary
  • Shortform Introduction
  • Introduction: Rich Dad and Poor Dad
  • Learning with Rich Dad
  • Lesson 1: The Rich Don’t Work For Money - Money Works for Them
  • Lesson 2: Buy Assets, Not Liabilities
  • Lesson 3: Reduce Taxes Through Corporations
  • Lesson 4: Overcome Your Mental Obstacles
  • Lesson 5: Keep Learning All the Time
  • Lesson 6: How to Get Started