Book Review – Rich Dad, Poor Dad

Written by Robert Kiyosaki in 1997, Rich Dad, Poor Dad is widely considered to be one of the foundational personal finance books written, having sold over 30 million copies as of this writing. The theme of the book is meant to be the financial lessons Kiyosaki learned from his two “dads”: his biological father, who believed in more conventional means to achieve success by going to school and climbing the ladder, and the father of his childhood best friend, who believed in working for yourself as early and as often as possible. For the first third of the book, Kiyosaki sticks to this theme, explaining at length the differences in the worldly and financial outlooks the two men held, and how he grew up amongst these viewpoints, ultimately choosing to follow the ideology of his friend’s father over his own, as his friends father was far more financially successful than his own father was. However, for the final two-thirds of the book, Kiyosaki largely abandons this format, and spends the rest of the book discussing the outlook he personally embodies.

This outlook stipulates that there are core differences in financial ideology that the ‘rich’ teach their children, which the ‘poor’ never do. Most of these ideological points (once stripped of the divisiveness of rich vs. poor) are solid advice that will truly help one establish and build their financial position if just starting out. Unfortunately, however, the delivery of these points often have a hollow ring to them. At his core, Kiyosaki is a salesman, and so there is a slick veneer to much of what he writes in order to make his concepts and books more controversial, and therefore more likely to sell (which, to his credit, he readily admits to doing in the book). But if you can get past the shiny coating of the get-rich-quick message, there are some solid and timeless financial principles here:

  • More financial education/literacy is needed for our youth, preferably in school
  • One is not forever relegated to their financial station in life, and can instead always improve their financial IQ through study and a desire to learn (a Growth mentality)
  • Ownership is the key to financial independence. Whether that is ownership of stocks, companies, products, land (Kiyosaki’s definitive favorite), or other assets, owning more assets that earn revenues (dividends, rents, or sales) will start you on the path to building wealth that is self-sustaining
  • In line with ownership, the key is to spend your spare money on building assets (like investing) vs. spending it on frivolities that will quickly disappear from your memory
  • There are two types of income: what he calls Labor Income (your paycheck), and passive/portfolio income (returns from the capital you have invested in assets mentioned above). The goal is to, over time, invest your labor income to steadily grow your capital income, so that eventually you won’t need your labor income anymore for your well being.
  • Mindset is critical: Don’t think “We can’t afford it.” Instead, think “How can we afford it?”
  • Finally, the reason that most people shy away from pursuing Capital income is fear. Giving away your current money for future income is inherently risky. It is far easier to play it safe and just keep living the way most people you probably know do. Learning to overcome these mental hurdles will be the hardest obstacle one will have to overcome, as well as the most time consuming. But it is also the most rewarding once achieved.

If you let the buck stop here, this is a solid starter book for anyone looking to start out on a life of more. But this could just as easily be a very dangerous book, as it’s full of anecdotes from Kiyosaki about making quick, big money for no higher value or purpose than simply the playing of the game (he frequently talks about making tens of thousands of dollars in a matter of days through flipping real estate investments, without enough offsetting warnings that those would be highly unusual results). There is no substance or driving principle to what Kiyosaki achieves or advocates, no value he is adding to the broader community or society, and instead it comes off as if he can’t help his own ego and deep need to convey an inflated sense of self-importance since he is making a lot of money. There is nothing wrong with wanting to be financially free (look at what it has freed up Bill Gates to pursue), but the intentions of your heart matter to how and why you go about earning money. Do you pursue it to eventually do some good in the world? Or do you seek it purely for yourself, for your pride or entertainment – the game?

If not mentally braced for these allures, they can be very misleading, as they sound very sexy upon first glance. But if one approaches the book properly balanced to see past these rabbit holes and understand that in building personal wealth, as in all areas of life, a healthy respect for the long game is needed, Rich Dad Poor Dad is a great starter book on the core financial principles and outlook that can set you up with a solid financial base and desire for ownership that can set anyone on the path to making a meaningful contribution to the world around them.