“Rich Dad, Poor Dad,” by Robert Kiyosaki is one of a handful of books that, after reading it, drastically changed my paradigm and also the course of my life.
Before reading the book I believed, like most people, that I would find wealth when I had earned enough income to be rich. This book taught me that wealth was not a function of how much money I made, but how free I was from having to make money. I learned that I could create wealth even from a tiny salary.
I took away three major concepts from this book:
1) The definition of an asset
2) The value of passive income
3) How to turn creativity into value
The definition of an asset
according to Kiyosaki is something that puts money into your pocket on a monthly basis as opposed to something that takes money out of your pocket. It’s a concept that seems like common sense, but after deeper analysis goes against conventional wisdom. For example, his definition of assets excludes a person’s home and car because they both cost money to maintain. Most people consider their home their biggest asset. After reading this book, instead of buying a big house to live in, I bought a big house to rent out, and moved into a small apartment at half the monthly cost of the house.
The value of passive income
. Before reading this book, I was dead set on owning my own business. While Kiyosaki encourages entrepreneurship, he draws a distinction between owning a business that requires time and energy to run and owning an asset that makes money with little or no maintenance. By collecting assets that produce passive income, a person can create time freedom. Time freedom is the holy grail of creative people because most creative pursuits have large barriers to entry and take years before returns are realized.
How to turn creativity into value.
One of the most fascinating things that I learned from this book is how wealthy people use creativity to find value in things that most people overlook. The classic example is a “fixer upper” property. If a person can find a house that no one wants and see it’s potential through creativity, they stand to make a handsome profit.
After I internalized this concept I realized that this type of creativity is what has always driven successful people. A successful stock picker can see the value in stocks when they are out of favor, a successful entrepreneur sees the value of a product or service before the rest of the market does, and a successful film-maker sees the value in telling a story that no one else has thought of.
As a compliment to this book, Kiyosaki has created a board game called “Cashflow.” Even though this game could be a lot less expensive, I have to admit that it has been priceless by allowing me to practice the concepts of the book without having to risk real money. I get a kick out of playing this game because it helps to reinforce the paradigm of how to be wealthy.