Rich Dad or Poor Dad?

Which dad is your dad?

The title of Robert Kiyosaki’s best seller refers to the wealth-building mindsets that are passed along from generation to generation. In the case of the Poor Dad, the goal is to “not lose.” His strategy is to avoid all things that could cause a significant loss. This refers both to high risk and lots of fluctuation. The best way to avoid these is to get an extremely high earning job, as it is very stable. The Rich Dad, on the other hand, has the goal to win. The strategy is to focus on the things that will result in the greatest rewards. That would be investments, which consequently come with the very things the Poor Dad is trying to avoid — risk and fluctuation. Technically, they both achieve their stated goals, but only one builds wealth. This is because the Poor Dad exchanges his time for money. This can only progress as a linear rate, since the amount of time he has available doesn’t change. The Rich Dad, on the other hand, reinvests the money he makes in order to make more money. In that sense, the amount of effort focused on building his wealth is ever increasing and more effective. This leads to an exponential, although not infinite, curve.

(Hand Drawn)

Using money to make money can be so effective that Kiyosaki even encourages you to use other people’s money to make you money. Those are investment loans. He does offer some warnings, of course…