Rich Dad, Poor Dad – a book review

Ostensibly, “Rich Dad, Poor Dad” (RDPD) is a book about how to make money. In this respect Kiyosaki’s formula is blindingly simple, so much so that I think he makes a good point that most of us are blind to it. At a deeper level, this book is about what it means to be an adult. Let me explain both of these.

rdpd

At the core of Kiyosaki’s formula are two ideas: Understand and shape your cash flow. Mind your own business.

Understanding your cash flow is nothing more than recognising where you get your money from and what it is used for. Having understood it, you can and must then shape how you spend it. First and foremost, you must consume less than you earn. This sound obvious, but it’s hard: modern marketing is very good and there are an infinite number of things to spend money on: an extra-large house, expensive holidays, good wine, books, fast cars, parties and socialisation. Having successfully avoided the consumer trap, next you must take this surplus cash and turn it into more cash.

This is minding your own business. Whether you invest in real estate (Kiyosaki’s preference) or something else, it should not be an afterthought. Instead you should focus on learning and improving your investing as much as you can. Great oaks grow from small acorns, but the acorn must first sprout a tiny leaf. At the time such a tiny leaf might seem irrelevant and more effort than it’s worth, but, like money, knowledge compounds. With effort, financial illiteracy becomes financial literacy. Minding your own business is nothing more than giving your financial situation the attention it deserves.

Which is why I was pleasantly confused that Kiyosaki wrote so much about emotion and self-knowledge. I last read this book more than ten years ago, and this was not the book I remembered. But it resonated with me. Adulthood is a recent focus of mine, and there’s a sense in which every book one reads is a mirror.

So what does Kiyosaki have to say about being an adult? Mindful awareness of your own emotion is important. The ocean between fear and greed is real, and you can either drift across that ocean at the whim of the wind or trim your sails. You can’t necessarily change the emotion but you can react to it deliberately.

More broadly, Kiyosaki stresses that each of us has a choice about what we do with our lives. Do we choose to master our financial situation and master ourselves? And do we choose to do it now? A bias for action over inaction is important.

Which leads naturally to “Getting started”. On this, Kiyosaki is vague. Actually, this is probably the biggest criticism of the book: fluffy vagueness. If you are reading RDPD because you want the kind of nicely illustrated step-by-step plan you get from Ikea then you will be disappointed.

The book ends with two chapters. One that is sweepingly strategic and one that is microscopically tactical. Neither is an instruction manual. In my mind that’s fine. Asking for a step-by-step guide to wealth is like asking for a step-by-step guide to happy marriage and good friendships. You can give tips and histories, but ultimately it’s a personal journey and the best another can really do is point you in the right direction. I think RDPD does that admirably.

big-ideas

The big ideas in RDPD

ideas-index

My ideas index for RDPD

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