Robert Kiyosaki is the acclaimed author of Rich Dad Poor Dad. The Rich Dad Company has made Rich Dad Scams: 8 Financial Scams Disguised as Wisdom available for free eBook download, so Kiyosaki talks in detail about scams everyone needs to understand. Kiyosaki discusses the fundamental challenges with the traditional school system and how corporate America kills the entrepreneurial genius of many bright workers. Kiyosaki then answers how much money one should save in his or her bank account.
Robert Kiyosaki is a fourth-generation Japanese-American who grew up in Hawaii. He joined the Marine Corps after graduating from college in New York, and went to Vietnam as an officer and helicopter gunship pilot. After the war, Robert went to work for the Xerox Corporation and in 1977 started a company that brought the first nylon Velcro surfer wallets to market. Feeling that he had something important to teach, Robert founded a new company in 1985 to teach business and investing to tens of thousands of students throughout the world.
At the age of 47 Robert retired from his business to devote time to writing, and in 1997 published the #1 New York Times best seller, Rich Dad Poor Dad. Soon afterward he wrote Rich Dad’s Cashflow Quadrant, Rich Dad’s Guide to Investing, and Rich Kid Smart Kid.
All the books have been on the best-seller lists of the Wall Street Journal, Business Week, New York Times, E-Trade.com, and other distinguished lists. Robert also created educational board games to teach individuals the same financial strategies his rich dad spent years teaching him… strategies that helped him retire at the age of 47.
Robert Kiyosaki’s goal is to give people information that will help them make their money work hard for them, rather than simply working hard for money.
ANNOUNCER: Welcome to Creating Wealth with Jason Hartman! During this program Jason is going to tell you some really exciting things that you probably haven’t thought of before, and a new slant on investing: fresh new approaches to America’s best investment that will enable you to create more wealth and happiness than you ever thought possible. Jason is a genuine, self-made multi-millionaire who not only talks the talk, but walks the walk. He’s been a successful investor for 20 years and currently owns properties in 11 states and 17 cities. This program will help you follow in Jason’s footsteps on the road to financial freedom. You really can do it! And now, here’s your host, Jason Hartman, with the complete solution for real estate investors.
JASON HARTMAN: Welcome to the Creating Wealth Show. This is your host, Jason Hartman, and thank you so much for joining me today. We’ll be back with today’s guest or segment, in just a moment.
ANNOUNCER: What’s great about the shows you’ll find on www.jasonhartman.com is that if you want to learn about some cool new investor software, there’s a show for that! If you want to learn why Rome fell, Hitler rose, and Enron failed, there’s a show for that! If you want to know about property evaluation technology on the iPhone, there’s a show for that. And if you’d like to know how to make millions with mobile homes, there’s even a show for that. Yep, there’s a show for just about anything. Only from www.jasonhartman.com. Or type in Jason Hartman in the iTunes store!
JASON HARTMAN: It’s my pleasure to welcome Robert Kiyosaki back to the show! Of course you know his name. He’s an international bestseller, and he wrote the #1 personal finance book of all time, which you’ve probably read. It’s Rich Dad, Poor Dad. And we’re going to talk about his latest work today, which is entitled Rich Dad Scams: Eight Financial Scams Disguised as Wisdom. And this is very timely for today’s world. And Robert, welcome back. Good to talk to you.
ROBERT KIYOSAKI: Thank you very much.
JASON HARTMAN: Well it’s good to have you on the show. So, tell us about some of these things that people should really be aware of, and concerned about, out there in the world. There’s snake oil salesmen everywhere. That was true hundreds of years ago, it’s true today.
ROBERT KIYOSAKI: Well, my question has always been, why don’t we have financial education in schools? So in my opinion, this financial crisis we’re in today—and it’s a serious crisis—really starts in the classroom. When I was a little boy, about 9 years old, I kept asking my teachers, when are we going to learn about money? And the teacher finally told me the truth: we don’t teach you about money in school. And so, that’s what I kind of—that’s at 9 years old, I said, I better find somebody who can teach me about money, and that’s when I met my Rich Dad, it was my best friend’s father. And I began to realize the biggest scam of all is education. And they only train you to be employees to work for the rich. As long as you know nothing about money, they can control your life. So that’s where the scam starts.
JASON HARTMAN: Yeah, it sure does. That whole system was designed by the industrialists 100+ years ago to create employees. It’s kind of like a factory. They were just, you know, educating, if you will, employees, as you’ve talked about in depth in some of your work over the years, to just work for them, and not to think, not to be entrepreneurs, not to be successful investors. So, why hasn’t that changed? I mean, are the powers that be, the National Education Association, as Steve Forbes calls the National Extortion Association, so powerful that we just can’t make a dent in the system?
ROBERT KIYOSAKI: That’s part of it. There’s a whole—you know, you were talking about 100 years ago. The exact date was 1904. A gentleman named John D. Rockefeller founded the Standard Oil Company. Basically heisted the educational system by creating the General Education Board in 1904, so 110 years ago. And what the general education system did, that Rockefeller controlled, was he then dictated the content or the curriculum of schools. So, as you know, to be successful today in the real world, you need academic education, you need professional education, and you need financial education. And the reason most people are highly educated very smart people like my Poor Dad, is they don’t have any financial education. And they think they’re smart! So as long as you come out of school with a false sense of, that I am smart, and you’re not, then it’s really tough to learn from an I’m smart, I’m great, and you’re an idiot, point of view. So what we have today—we look at politics, you have a bunch of very highly educated, smart people, who really don’t know much about money, and that’s from the president on down. So that’s our problem.
JASON HARTMAN: Yeah. I certainly agree with you there, Robert. So, what can we do to overcome this? I mean, reading Rich Dad Poor Dad is a great start that’s inspired millions of people, of course. But to take a deeper dive, where should people really focus their effort, when you talk about financial education? And do you include entrepreneurship in that, by the way?
ROBERT KIYOSAKI: Well, I don’t—it’s not about so much entrepreneurship, as you have to know assets from liabilities. And you know, the richest people on earth never went to school. They’re called Steve Jobs, Bill Gates, the Beatles, Oprah Winfrey. And what they did was, they created mega brands and mega businesses. And the same as Google, and you know, Facebook, and all this. Walt Disney never finished school. So what they did, was they were great entrepreneurs. Which you don’t have to be that big an entrepreneur. I have a friend that’s my age, and he started when he was in high school with I think 12 chickens. And he just started taking the eggs of his chickens, and reinvesting his eggs. And today, his chicken factory out of Ohio produces 10 million eggs a day. So, you figure he’s making 10 cents an egg, or whatever he makes—that’s a lot of cash flow. And then he also sells a fertilizer, a chicken meal, and all this, and the guy never went to school; he was a chicken farmer. And Colonel Sanders, all he had to sell was a chicken recipe. And JK Rowling was on welfare, wrote Harry Potter. So, a lot of it is very—in understanding the world of business. And you don’t have to be an entrepreneur to tap into it. So, JK Rowling was partly an entrepreneur, and she just tapped in.
JASON HARTMAN: Yeah. Good, good point. So, you know, I’d like to talk to you about some sort of related issues, if we could. Yesterday I posted on my Facebook, mentioning that I was gonna have you back on the show today, and I had a few questions that people brought up. And one of them is, the seemingly very exciting area of crowd funding. I have a feeling you would have something to say about that. Especially as it comes to maybe funding real estate deals.
ROBERT KIYOSAKI: Well, crowd funding, to me, is a scam also. I mean, it’s not the way I would do it. But as long as it stays small, people will not get hurt. But as you know, there’s right now a lot of conmen who are going to float dubious deals, and people will send money, and like they did to Bernie Madoff, and somebody’s gonna get burned, it’s gonna be a big hullabaloo about it, and they’re going to try to shut it down. You can see it coming without really thinking much about it. Sort of like Bitcoin. I try and get my head around it, but I’m going, well, eventually somebody’s gonna get burned. So every time you have people just kind of rushing in to something, then you’d better step back a little bit and pay attention.
JASON HARTMAN: And think. But as an alternative to Wall Street, I mean, we know that Wall Street’s a scam in so many ways. Even though it’s legalized through lobbyists and PR firms and lawyers and accountants. But it just seems like there’s gonna be a lot of, a lot of opportunity for the little guy to get a deal off the ground nowadays. Of course there will be scam artists. We know that’s coming. There will be tons of litigation. But we already have that. We have scandals galore on Wall Street, even after all the so-called corporate governance reforms.
ROBERT KIYOSAKI: Yeah. So, what’s your question?
JASON HARTMAN: Well, I don’t know. Just, I guess you answered it, so thank you for that.
ROBERT KIYOSAKI: The question is what are you going to do about it. And I’ve never changed my tune. I’ve always said you have to have financial education. But the biggest scam of all is what Wall Street passes off to the education system, as financial education. For example, what Wall Street and the financial planners and the stock brokers and the schoolteachers say is financial education, is save money, invest for the long term in a well diversified portfolio of stocks, bonds, and mutual funds, and you’ll get rich. Well, that’s how they rip you off. Because the way you get ripped off in the stock market is, as you know, the market always goes up. Because they pump it up with quantitative easing right now. And so, all the amateurs come running in because they see the stock market at all-time highs. And then the bottom’s gonna fall out, and then the amateurs will get ripped off by the professionals. And it happens all the time.
JASON HARTMAN: It happens every time. You know, it’s always the amateurs that come in when the news is so positive, and everybody’s, you know, the adrenaline junkies. And they’re always—they’re playing musical chairs, and the music stops, and all the big guys have already pulled out, haven’t they?
ROBERT KIYOSAKI: That’s the game. You’re probably too young to remember this, but in the comic strip Peanuts, you know, like Charlie Brown and Lucy, Lucy would always hold the football, and Charlie Brown says, you’re gonna pull it out, aren’t you? She goes no, no. Kick the football. And every time, Charlie Brown winds up, runs up the football, and Lucy pulls the football away and he falls down. It happens every single time. People don’t learn.
JASON HARTMAN: It’s amazing how short people’s memories are, aren’t they?
ROBERT KIYOSAKI: Well, if you look at what’s going on in Iraq, I mean, somebody said, oh my God, this is just like Vietnam. I said, it’s always been that way. You know? We’re not there to fight for peace. We’re there to fight for the military industrial complex, because it’s very profitable to explode bombs in the desert. And it’s very profitable to have people killed. Oh, we’re there to save the Iraqis! That’s BS. They’re fighting for the military industrial complex. And the moment you recognize, you know, I’m a former marine, I fought in Vietnam twice. One day I woke up and I said, this is not about world peace. This is about money. And that’s why, you know, I don’t regret going to Vietnam, but I kind of woke up, and I see the same thing going on in Iraq today. It’s a war we could never win.
JASON HARTMAN: Yep, no question about it. So, Robert, as we’ve got a little time left, I’d like to ask you—you’ve made some predictions in the past that have just been amazingly accurate, and prescient. What do you think is coming next for us? I mean, are we going to see a lot of inflation? Will we see deflation? It seems like, with all the money printing, we ultimately have gotta see inflation. But I don’t know. There are those who think both ways.
ROBERT KIYOSAKI: Yeah, that’s the truth. You don’t really know which way it’s gonna go, but obviously, the government wants inflation, because you can fight inflation. You can’t fight deflation. So, you know, when prices start to go down, they accelerate down. And let me give you an example. If you knew today that you’re gonna buy a new Kia, and it was $10,000, but you knew tomorrow it’d be $8,000, you wouldn’t spend 10. And if you knew it was going from 8 to 6, you would wait again. And so, that’s when the bottom drops out, because people are waiting for it to crash anyway, so that’s deflation. So, the Fed, obviously, is trying for inflation. And the only thing they’re inflating is the stock market, and they’re trying to inflate the housing market. And as I said, we don’t learn from our mistakes. We didn’t learn from Iraq, we didn’t learn from Vietnam, and we didn’t learn from the last crash. So they’re doing exactly the same thing. The stock market isn’t really up. What is happening is that the CEOs are basically repurchasing their own stocks, so it gives the illusion the price is going up, but they’re just drying up the supply of stock. And eventually the amateurs are gonna come rolling in again, and it’s gonna be a Wile E. Coyote moment, you know, beep beep, and you’ll fall off the cliff.
JASON HARTMAN: Yeah. That is true, and I remember when the Dow went above 15,000, and you know, of course CNBC was going crazy, and everybody was talking it up, and all you do is you compare the real and nominal dollar return, and really, until the Dow got to—of course, the S&P is a more accurate gauge, because it’s much broader, but just looking at the Dow, since it’s quoted the most—it had to be 15,800 to be, in real dollars, exactly where you were about 11 years earlier. And they’re talking about record highs. And you know, most people, they just don’t even realize it. They don’t even get it! It’s like trickery with numbers.
ROBERT KIYOSAKI: That’s correct. And they can lie with words. For example, when the crash hit in 2007, 2008, all these big companies came out and said yeah, we beat the S&P. Well, what they didn’t tell you is the S&P went down by 57%, and they only went down by 50%. It’s—as somebody says, you can’t cure stupidity.
JASON HARTMAN: Yeah, that’s for sure.
ROBERT KIYOSAKI: It’s the same—we’re making the same mistake again and again and again, and the average person will never learn, so, shame on them.
JASON HARTMAN: You’re absolutely right.
ROBERT KIYOSAKI: If you understand a crash, it’s a good thing. I made more money between 2007 and 2014, than I did in all the years of my life prior to that. But I was prepared for it. I had experience, I had education, I had my partners, I had my team, so when the crash came, you know, we thought we went to heaven.
JASON HARTMAN: You were ready to seize upon opportunities, when most people either weren’t, or they were just scared, because they didn’t know any better, so they just were full of fear. You know, they were allowing the media to program their minds.
ROBERT KIYOSAKI: Or, worst of all, they don’t have the skill set to take advantage of the crash. You know what I mean? So, they may be a PhD in microbiology, very smart people, but they know nothing about crashes. So. And I’m afraid the next question may be a long one. You know, in 1929, the Dow went down from a high of 381, and it took 25 years to hit 381 again. So it went down in 1929, and it didn’t hit 381 until 1954. So, this next one may stay down for a long time, because there’ll be redemption after redemption, which means, all guys like me will be cashing in the stocks, because they don’t have time. You know, so they cash now.
JASON HARTMAN: Yeah. Very good. Very good point, very good point. And I think probably what really rescued, if you will, the stock market way back then, was the fact that Merrill brought so many people from the general public into the stock market. They started promoting the stock market so much more widely, and when the average John Q. Public started bringing their savings into the market, that probably helped quite a bit too.
ROBERT KIYOSAKI: Well that’s correct, they took Wall Street to Main Street. Merrill did do that. And then the worst thing between 1929 and today was in 1929, only a few people were in the stock market. And today, what you’re bringing up is, I would say, most people in one way or the other, through their funds or retirements, are in the stock market. And if you look at the Dow today, it’s in a triple top. And a triple top is possibly the most ominous, you know—it’s like the, it’s almost like they showed a double funnel tornado yesterday. Well, a triple top is like a triple tornado hitting. So, that’s why I look at all that stuff, and I listen to CNBC, and I feel for every person my age that’s going, what should I do? What should I do? You know, I’ve got my money in the stock market, and I’m receiving nothing in interest in my savings, and I don’t know where to put my money. Well, those are all symptoms of a person who may be highly educated, but lacks any financial education. See, it’s really a good time coming up; unfortunately millions of people will be wiped out.
JASON HARTMAN: Yes. You are most definitely right about that. It is going to be painful for a lot of people. What are you doing with your real estate portfolio nowadays? And by the way, I want to tell you something that I just discovered about two weeks ago. I was reading your Wikipedia entry, and someone put in there that you were on my show in 2011. And it said that you owned 1400 apartment houses, and you know, I’m sure that was units, they sort of misquoted you, probably, and talked about investing in warehouses, triple net leases, and I know you talked about oil wells too, back then. And just kind of wanted to see where you were on real estate. We talked a lot about stocks.
ROBERT KIYOSAKI: Well, first of all, I wouldn’t believe anything I read on the web anyway.
JASON HARTMAN: Well, yeah. Fair enough.
ROBERT KIYOSAKI: I don’t know how people believe that stuff. I mean, I’m an old guy, so I sit down and watch it and I go, you can say anything you like? Why would you believe it? And another thing too, it’s not 1400, it’s 4,000.
JASON HARTMAN: Hmm, that’s interesting.
ROBERT KIYOSAKI: What I’m doing with real estate is, I have about $500 million of debt, and right now, the average floating debt is around 5%. And a company just came by and said, we’ll refinance it all for less than 3%. Well, you don’t have to be a rocket scientist to know that if you take $5 million at 5% and you drop it to 3%, that’s $2 million in extra cash flow due to reduction in mortgage payments. So, that’ why debt makes people rich. And yet you listen to all these so-called financial experts who are saying get out of debt—that’s really bad advice. You should be getting into debt.
JASON HARTMAN: Oh, I completely agree. Yeah. Yeah. Unbelievable. And, what are your thoughts on the real rate of inflation? I mean, of course we’ve got the official number, but if you’re getting your debt at 3%, I would argue that you’re probably—you have a negative real interest rate there.
ROBERT KIYOSAKI: Yeah, I do. Because—well, it depends on how you compute CPI, Consumer Price Index. Because in 1972 I think was Nixon changed evaluations for the CPI Consumer Price Index, and he took out food, and took out fuel from inflation. So, that’s how Janet Yellen can get up there, or Obama can say, we have no inflation. But if you go shopping, you’ll see inflation all over the place. And you know, when Obama took office, gasoline per gallon was about $1.80 a gallon. Today it’s about $3.50. So that’s a 100% increase in so many years. But Janet Yellen and Obama can say there’s no inflation. So that’s what I’m saying—it’s like Facebook or the Web, I don’t know how you believe anything today.
JASON HARTMAN: You really have to read between the lines. And people have got to think. They’ve gotta have an education, they’ve gotta think for themselves, and just, you know, know how to dissect this stuff and to understand it. And buy a mutual fund, rather than accumulate some good long term fixed rate debt against real estate. And especially, Robert, when as real estate investors, we don’t even pay our own debt. Our tenants pay our debt for us, right?
ROBERT KIYOSAKI: Correct. I mean, the key to life is other people’s money. So you borrow your bank’s money, and your tenant pays back the bank.
JASON HARTMAN: Yeah. What a deal.
ROBERT KIYOSAKI: So there is a con some place.
JASON HARTMAN: All you need to do is get in the middle of that deal, and you can get fabulously rich, right?
ROBERT KIYOSAKI: Imagine that—the bank will give you the money to buy something that makes you rich. And then the tenant will pay to live there. And then pay off the bank. On top of that, you get appreciation, depreciation, amortization, all these tax breaks. Then you hear everybody complaining about rising taxes. But if you own real estate with debt, you don’t pay any taxes. So you know, that’s what this book, I guess, is about. Eight financial scams disguised as wisdom. You can get it at richdad.com. But it starts with school, you know. But being successful in school doesn’t make you rich.
JASON HARTMAN: Yeah, that’s for sure.
ROBERT KIYOSAKI: It’s kind of a rip off. I kind of look at these student loans; I feel for the young people leaving school with all of these $20, 30, 40,000 in student loan debt. That’s hard to pay back.
JASON HARTMAN: It sure is. Especially when there aren’t jobs out there waiting for them. And the fact that that debt is the only type of debt not dischargeable in bankruptcy. So, they’ve literally created a generation of indentured servants that don’t get a second chance.
ROBERT KIYOSAKI: It’s even worse than that. What you’re saying is accurate. It’s the worst possible type of debt. You know, but if I screw up on an apartment house, I can just bankrupt it and you know, I’m free and clear from the debt. But I can’t bankrupt a student loan debt. On top of that, I haven’t learned anything about money on top of it! So what did I spend that money for? See, it goes back to what I was saying when I was 9 years old raising my hand and saying, when are we gonna learn about money? The answer was never. So whey am I going to school then? You know, that was my question. Look at the richest people on earth didn’t finish school. Steve Jobs, Bill Gates, Michael Dell, Zuckerberg, Walt Disney, Henry Ford, Oprah Winfrey. Just to name a few.
JASON HARTMAN: Yep. And don’t forget Jason Hartman in there. Because I just felt like when I was in college, I was listening to a government bureaucrat, essentially, teach me about something that I’m just never going to use. I was anxious to get out there in the real world and buy properties. And I bought my first rental property at 20 years old, and you know, it’s been on from there. And successful people are doers, you know? They learn, of course. You’ve gotta balance learning and doing. But they get the kind of education that is real world education. Financial education.
ROBERT KIYOSAKI: In 1973 I returned from Vietnam. I was a pilot for the marine corps. My Poor Dad obviously wanted me to get my MBA. And my Rich Dad said, well, it’s a waste of time. But anyway. So he suggested I take a real estate course. I took a three day real estate course, as well as sign up for my MBA. And I learned more in three days from the real estate course than I did in my MBA program. So, finally, after falling asleep every night of the week at the MBA program, I just dropped out, and got rich buying real estate.
JASON HARTMAN: Yeah. That’s true, that’s true.
ROBERT KIYOSAKI: You know, it was less time, I made more money. It cost me three days and $385, which was a lot of money back then, back in ’73. But I became a multi-millionaire over and over and over again for that $385. And I pay zero taxes legally. What’s better than that?
JASON HARTMAN: Hey Robert, I want to take a guess. Was that like William Nickerson’s course, or something, way back then?
ROBERT KIYOSAKI: Yeah, it was. Yeah, that course. Yeah.
JASON HARTMAN: Yeah, yeah. That’s fantastic. That’s the old days of real estate investing and real estate gurus out there. But fantastic. Well, your website is richdad.com, of course, and people can get this book, it’s a download right from the web. I found it really fascinating how you did conspiracy of the rich, which was fantastic, by the way. I really enjoyed that one. And you know, how it was kind of this collaborative effort. Did you do that with this new book?
ROBERT KIYOSAKI: Uh, this new book is, to be truthful, that book is coming out—these are books I wrote a long time ago. So, but what I said a long time ago is coming true.
JASON HARTMAN: Still true, yeah.
ROBERT KIYOSAKI: The financial scams—I mean, it’s really hard to believe, the financial scam is going to school. And a job is the worst thing you can get, because you’ll pay more taxes. And the harder you work, the higher tax rates you move into. And why would you save money every place? You gotta save money—why would you save money when I can borrow money at 3.8%? And then, why would I invest for the long term in the stock market, if I’m only gonna get ripped off when the market crashes, and why would I buy a house when a house is not an asset? And so, it’s really a massive scam; the scam has to do with what so called the rich have perpetrated upon us without financial education. So what the scam is, what we think is smart is actually stupid. So that’s really what the eight scams are. And guys, if you really want to find out how big a scam that information is, that’s why you should get the book, and maybe you’ll stop thinking that way. Maybe you won’t be looking for a job. Maybe you won’t be going back to school. Maybe you won’t be thinking of your house as an asset. Maybe you’ll think, maybe I should get rich instead of working for somebody else. And that’s the purpose of my work. I don’t—I’m not saying what you should do, but I would say think differently. And the biggest scam is the lack of financial education in our school system. Like I said it started in 1904 with a man named John D. Rockefeller and the General Education Board. If you read the bylaws of the General Education Board, the purpose of the General Education Board was to take farm kids and turn them into employees in factories. That was the mission, and nothing has changed. And so, if you’re going to school for a job, and all that, youo’re being suckered. That’s the worst part about it.
JASON HARTMAN: Absolutely.
ROBERT KIYOSAKI: I’m not saying education’s unimportant; I’m saying that it may be obsolete.
JASON HARTMAN: Right, right. And you know, the worst thing is, to see people get these useless liberal arts degrees. You know, at least if you’re gonna go to school, be an engineer, or do something that’s real, you know? I can’t tell you, Robert, how many people over the years I’ve hired who have degrees in psychology. You know, that they’re not using. I mean, it’s just unbelievable. But, good advice. Well, very sage advice, again, from Robert Kiyosaki. It’s a pleasure to have you back on the show. His website is richdad.com. Go and download this book; I think you’ll really enjoy it. And Robert, again, thanks for joining us.
ROBERT KIYOSAKI: Thanks for the time.
ANNOUNCER: This show is produced by the Hartman Media Company. All rights reserved. For distribution or publication rights and media interviews, please visit www.HartmanMedia.com, or email [email protected] Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate, or business professional for any individualized advice. Opinions of guests are their own, and the host is acting on behalf of Empowered Investor, LLC. exclusively.
Transcribed by David
The Jason Hartman Team