Rich Dad, Poor Dad

A Highly Critical Review of Rich Dad, Poor Dad by Robert T. Kiyosaki with Sharon L. Lechter

These reviews are supposed to be of books that Dubya wouldn't read, but this one is quite possibly a book that Dubya may have read and would almost certainly approve of. Yeah, it's full of lies, but they're the kind of lies that Dubya and his rich buddies would like to believe. To put it succinctly, the author might be monetarily rich, but he's intellectually and morally bankrupt. This book is a kind of manual for 'the goodness of greed', but when you actually think about it, you realize that the truth is otherwise. The essential premises are contradictions. Greed may seem good for a few winners, but he ignores the much larger numbers of losers and the total loss for society. The author claims everyone could use his methods to become rich, but if everyone did, then the society would collapse and we'd all starve to death. You can't eat money. Someone should run the numbers on what percentage of the population could actually use his strategies before society collapsed. I'm sure the author hasn't.

Basically I'm going to work through the book sequentially describing some of my stronger reactions, relying on the epistemology of lies described in my earlier review of Imperial Hubris. In brief, a Class 0 lie is an internal contradiction, Class 1 is a counterfactual statement, Class 2 is partial truth, and Class 3 is truth presented to seem false. (I'm not sure if there were any Class 3 lies here, but they are hard to spot, and I wasn't really looking closely enough for them.) Finally, I'll discuss my alternative economic perspective that is the foundation of my strong negative reactions.

The first part of the book was basically historical and autobiographical, and my main reaction was how contemptuous he was towards his own highly educated father. He tried to be polite about it, but it was quite clear that all of his comparisons and contrasts were in favor of his adoptive "rich dad", who was actually the father of his friend Mike. The essential story line here was that Mike's father wanted to teach his son how to be a successful businessman, and the author of this book basically went along for the ride (casting off his own contemptuously impoverished father), and wound up quite wealthy, though not nearly as rich as Mike (who inherited the large head start as well as the same training).

My first strong reaction was actually to a Class 1 lie on page 69, where he cites the golden rule as "He who has the gold makes the rules." Actually, this is a double lie. The actual golden rule is "Do unto others as you would have them do unto you", which makes his so-called quotation a counterfactual statement. However, this lie is also a Class 0 lie of self-contradiction, though that wasn't apparent yet. After finishing the book, I realized that at no point in the book does he actually say anything about making rules. The entire emphasis of the book is on playing by the existing rules, and with no considerations of any rule-changing topic such as political lobbying.

(This part actually reminds me of a character in Crooked House by Agatha Christie. That character was very good at making money by skating along the edges of the laws. He was supposed to be so good at it that he often caused the creation of new laws, but he just moved to new niches and new cracks and continued making money--which also reminds me of a later section of this Rich Dad, Poor Dad book where he describes the importance of moving into new ways of making money, though he didn't mention changes in the laws, except in the passive sense that changes occur and create new opportunities.)

On page 85 he describes Ray Kroc as the founder of McDonald's. Having read a couple of books about McDonald's recently, I started by wondering about the intended sense of "founder" here. The key ideas of McDonald's came from elsewhere, but the main point in this book was that Kroc was really in the real estate business, not the hamburger business. I think this qualifies as a kind of Class 1 lie, since no one would claim that Kroc was a founder of the real estate business.

On page 89 is the first clear appearance of the central contradiction of the book. He is arguing for the acquisition of assets, which he files into eight categories (including a catchall "anything else"). The essential feature of these assets is that they all produce money, but none of them involve the owner in the actual production of anything. Yes, it is okay (according to the author) to buy a business that actually produces something--but only if you are *NOT* involved in the business. He actually words it as "Businesses that do not require my presence." Well, actually, it wouldn't matter if it didn't produce anything, since his criterion for being a desirable asset is only that it produces income. Remember that he is advocating that everyone should follow his guidance--but the result is that no one will produce anything and no one will actually have anything except for money. No wonder he didn't want to consider the actual golden rule.

On page 102 I was struck by his reference to his "first Porsche". I felt this was a kind of self-contradiction for several reasons. The most important is that he is emphasizing the need to control expenses and frequently criticizes people who spend too much--but suddenly it's okay to buy a Porsche. Not to mention it's just his first one. He plays the humble game pretty often. Are we supposed to believe his second Porsche was an economy model?

On page 110 he suddenly changes his angle. The new crucial factor for success is this "factor" with various names, but basically the willingness to take risks. This is basically another Class 0 lie since he's now thrown away his various other criteria for success. Later on the same page, he says "it's not the smart that get ahead, but the bold." (He replays the same theme later on with regards to effusive praise of Texans. Again touching one of my Texan nerves...) Until this point he has frequently been speaking in praise of education, but it's increasingly clear that education can't insure you become rich, and getting rich is the only metric of success he cares about. I also regard it as a Class 2 lie, since he's ignoring the large number of losers, even including the bold ones. The unspoken deeper truth here is that the author thinks of himself as a winner, and he believes winners have no reason to think about all those pestilential losers.

On the next page he concludes that "There will be a dramatic increase in the number of new multimillionaires." Another obvious self-contradiction, though the easiest way to make it come true would be through hyperinflation caused by too many people creating too much bogus 'value'. This is actually related to the deeper reality of this chapter, except that he doesn't really consider what it means to say that "The Rich Invent Money".

On page 120 he says "So did Bill Gates" in terms of giving the market what it wanted. This is Class 1 since most of Microsoft's success has involved dictating to the market what Microsoft wanted to sell. Also Class 2 since it ignores the competitors that Microsoft crushed along the way.

Page 133 is another Class 0 section criticizing education. Lots of lip service to the value of education, but once again he is making it clear that the real metric is wealth measured in monetary terms.

Page 137 is probably the peak of his moral bankruptcy. Here he quotes in an approving way a "managing director" of a "major national pension consulting firm" who recommends the "Silver Bullet" plan for baby boomers without pensions. The explanation is "they can always blow their brains out" if they can't afford to keep eating. He certainly wouldn't want this advice to be applied to himself.

Still on page 137 he continues with a Class 0, 1, and 2 rant against "socialized medicine" forcing hospitals to kill patients old patients. The Class 1 part is just because the actual track record for socialized medicine is generally very close to non-socialized medicine, but consistently better for the specific group of people he claims are suffering. The Class 2 part is because he ignores such details as wealthy people still buying better medical treatment regardless of the rest of the system. However, the Class 0 part is actually related to his discussion of wealth elsewhere in the book, where he says wealth should be measured in terms of how long you can go without working. Well, according to his own criteria, functional social security would mean that everyone is wealthy--though that is clearly not his view, as made clear by his consistently hostile consideration of taxes. (Actually, the entire tax topic should be handled separately though I didn't flag those pages specifically. He never considers whether or not taxes produces any benefits--except that he frequently twists tax laws to his own advantage. He even had a Class 0 mini-history of taxation around page 95.)

On page 141 he gives ex-schoolteachers some credit in cases where they're earning lots of money. Does he know that McDonalds finds that former teachers are among the best candidates to manage their restaurants?

On page 147 he is arguing for the universality of his approach, though in a backwards and self-contradictory way. He has a list of "reasons", otherwise known as personality traits, that prevent some people from becoming rich. I felt the "reason" that was missing was "morality". In particular, he frequently cites examples from real estate, and often involving forced sales of various kinds. In other words, his approach to making money is to exploit other people's misfortunes.

A related example involved a special kind of state bond that he recommends buying because this bond pays 16%. He didn't really go into the details, but I strongly sensed this was another Class 2 lie where he was downplaying the negative sides, which (by indirect hints) involve the risks and the loss of liquidity in the land that is apparently required to secure the bond. Actually, the return of the bond might be 16%, but if it's linked to real estate that can't be sold, then the real return will actually be determined primarily by the value of the real estate after it becomes liquid again. However, there are also moral and contradictory aspects of this example, since it represents benefiting from the government taxes he keeps denouncing everywhere in the book. (He consistently attacks government, but there is nothing intrinsically wasteful about government that can't be matched by examples from private industry, and there's many important services that are legitimately and most effectively provided by government--and taxes are needed to pay for them.)

Another exemplary area where he boasted of his winnings was the stock market. For example, he boasted about a deal where he made a lot of money playing on America's increasingly dangerous dependence on oil. However, one the most immoral passages of the book was his defense of insider trading, basically claiming that all stock trading was more or less inside trading--and he just wanted to be as far inside as possible without actually getting arrested for it.

Returning to the progress through the book, on the next page (148) he claims that a small investment would eventually make you very rich because of the miracle of compound interest. Another Class 2 lie, since no one lives as long as his example, but also because conditions could never remain stable that long, or the money itself would adjust to be appropriately less valuable.

Near the end of the book he suddenly introduces another Class 0 lie as he tries to make himself look moral. He speaks of the value of donating to charity and criticizes his own father for being too poor to donate more. Since it completely clashes with the rest of the book, it's clear that this is just a moral bandaid--and if you believe it, you would probably be the kind of sucker who helped him make most of his money.

From my notes I see the topic of inheritance taxes wasn't cited concretely. Suffice it to say that he's against them. Only the children of rich kids should be entitled to that advantage--which again contradicts his universal claims.

One more topic was the Marine Corps, which he mentions in a number of places and recommends as a learning experience that contributed to his abilities to make lots of money. Remembering my own experiences in the Corps, I'd agree to the learning experience part, but as far as learning to make money, I'd just say "Not so much."

In conclusion, I have to regard the author as totally immoral, someone who eagerly accepts benefiting from other people's miseries and failures. His only metric of personal value is cash, and his only concern is with making sure he has as much as possible. Why did he write this book? My current hypothesis is that the most important reason is that he found it to be an easy way to make more money (especially since most of the editorial grunt work was apparently done by someone else), and secondarily, he is trying to 'make peace' with the memory of his pro-education father--his real father, the poor fool who spent his life teaching and supporting teachers. I rather hope his father's ghost doesn't find out about it.

His vision of humanity is that we are basically vicious animals, but this author sees money as the only important law of the human jungle. Therefore the goal of his life is to collect as much money as possible. Apparently a life with lots of money is more valuable than a life without money. The author makes it clear that his adoptive rich dad was better in his opinion than his relatively impoverished father.

My conflicting view is that people are basically equal, and the poor people contribute, too, both as people and to the economy. My perspective is that it is essentially wasteful for one person to accumulate extreme wealth. Not just the first Porsche, but *ALL* of his Porches are wasteful. To actually drive the economy, it's better if lots of people are spending money, and happy to do so, rather than fearfully protecting their small amounts of cash. If they believe that social security is going to keep them from starving to death, then they can spend their money. Yes, there is a problem if people go into debt, but encouraging personal deficit spending is a problem of its own created mostly by immoral advertisers and greedy bankers. (Medical expenses are important, too, but special. No one wants to be sick, but no one can predict their exact medical expenses, and statistical treatment is the only approach that makes sense. Obscene profits for insurance companies and trying to skip over some people or letting them skip over themselves are fundamentally bad.) Basically the systems in France and Sweden make more sense to me. Lots of people seem happy and secure there. They pay high taxes, but they believe they get good values, especially in terms of economic security in exchange for their taxes.