Summary of Rich Dad Poor Dad

Table of Contents

Key Concepts

Assets and Liabilities

Difference between rich person and poor people:

  • Rich person purchase assets
  • Poor and middle class people buy liabilities

Difference between assets and liabilities:

  • Assets bring money into our pockets
  • Liabilities take money out of our pockets

Know my cache flow by using the Profit and Loss Statement and the Balance Sheet.

Other Important Points

How to buy luxury something

  • Rich person first invest in assets, then finally buy luxury items with money generated from the assets
  • Poor and middle class purchase luxury goods first, then use remaining money to buy assets (if the money is still there…)

Automated System

The important point is to build a system that doesn’t require my time to operate.

  • Rich people make money work for them
  • Both poor and middle class work for money

Definition of Assets

  1. Business that automatically generates money without me
  2. Stocks
  3. Debts
  4. Real estate that produces revenue
  5. Promissory notes, IOU (I Owe You)
  6. Copyrights, intellectual properties
  7. Others (something valuable)

To built assets that I love or have strong passion or interest in is the most important to keep maintaining them.

Financial Intelligence

  1. Accounting ability: reading the profit and loss statement and the balance sheet to understand the meaning of numbers, financial literacy
  2. Investment ability: building assets to produce money by using money
  3. Ability to understand market: judging appropriate timing to invest, demand and supply
  4. Ability of law: knowledge about tax incentives and preservation of us to own company

Two Types of Investor

One side invests in financial products packaged by someone else. the other creates its own investment from scratch.

  1. Ability to find opportunities that others may not be aware of
  2. Ability to raise funds: there are may ways to do it, not only from banks
  3. Ability to gather talented person and to organize a team

Others

  • Profession and business are deferent
  • To establish a company is not same as owning my business
  • Japan has no laws similar to 1031 exchange in US (see my previous post)
  • The busy person is the laziest: hard work for my future with strategy is ok, but hard work for company without any plan is just lazy. It’s just to get away from thinking about my life.
  • One of author’s assets is to have strong connections to the excellent professionals.

What I cannot agree

Broader and Shallower Knowledge Than Specialty

  • The author said in this book that to have broader and shallower knowledge than specialty is important by showing example of McDonald’s which is not only the hamburger specialist but also business specialist with excellent real estate strategy.
  • I can partially agree with it. The combination of specialty (hamburger) and other knowledge (business, sales, marketing, logistics, etc.) is important. Even if it’s the best hamburger in the world, it’s difficult to sell it with only hamburger skill without other technique.
  • However, especially with regard to engineer, narrower and deeper knowledge, skills, and experience are the most important. Do you think an engineer with shallow knowledge is more competitive than ChatGPT?
  • Engineers must be a narrow deep domain specialist with other knowledge in business, sales, marketing etc. Have combination of skills.

Business Models

Other options:

  • The author mentioned about only real estate and stocks.
  • First edition of this book was published in 1997. It was in the dot-com bubble era. There were still no Internet services like youtube, instagram, twitter, patreon, and others.
  • Off course, real estate and stocks are still good asset now. But we need to think more creatively business models.
  • Especially, engineers have ability to create services and products from scratch, and there are tons of ways to deliver them to everyone in the world.

Employee Sounds Like Evil

  • This book’s opinion sounds like “Employees are evil, lazy, and fool. Business owners and investors are smart”.
  • I don’t think so.
  • In my opinion, employee is not so bad (if it’s a good company). Nowadays AI development is required numerous dataset and computer resources. The cutting edge research often has many contributors on its paper. If we want to research about exciting something, it’s one of good choices to work for big tech companies as an employee.
  • The worst thing is to continue an employee without thinking completely.
  • We need to treat our jobs or professions as business. Our specialties, skills, knowledge, experience are one of products to sell.
  • Income from employee is just one resource of money. Flexible business models are possible. Employees can have side projects like web services, video contents, etc. Alternatively, other resource of recurring income from supporters could be build on web services. We can stay an employee with side business, or quit it after side project got bigger than it. There are a lot of options to build our business models.
  • Create the only my own system for me.

Network Business

  • Author recommends network businesses, but I hate them.
  • In Japan, network businesses are known as “multi” (short for multi-level network) with very bad feeling. It’s almost same as the “fraud” because of salesperson’s awful compliances.
  • Of course, network businesses themselves are legal in Japan. However, Japan’s law doesn’t allow to invite someone to something without noticing that their final purpose is sales (it’s called blind sales).
  • In Japan, especially around Tokyo areas, there are lots of illegal network business salespersons.
  • We can easily find these kind of illegal activates at everywhere (dating apps, seminars, bars, parties, BBQs, cafes, streets, etc.).
  • For example, cafes near to big stations like Shinjuku, Shibuya, etc. sometimes have bad reputations because they are places where we can see many sales scenes related to network businesses.
  • I have experiences to meet some network business people and to join few seminars, but I felt they were just workload to make their boss rich. Of course, this was blind sales. After I found that they were member of multi, I immediately deleted their contacts because I didn’t want to be involved into foolish criminal. Fortunately, I paid only few dollars for seminars. I think this expense was not so bad to know their bullshit invitation systems (I want to write post about this someday).
  • And this book “Rich Dad Poor Dad” is often used as the first key to invite seminars to study finance intelligence and it leads to network business. In Japan, google search suggests “rich dad multi”.