The Six Minute Book Summary of The Book, Rich Dad’s Prophecy, by Robert T. Kiyosaki With Sharon L. Lechter

EXECUTIVE SUMMARY

This book is about a guy named Robert whose best friend’s dad went through life teaching Robert and his son everything they need to know about being financially set. Rich dad, as he is referred to in the book, predicts that there is going to be the biggest stock market crash in history, so he is preparing Robert and his son to be ready for when it happens. Rich dad is a very successful investor and he is very knowledgeable. He not only wants to teach Robert how to be a successful investor but he also wants to help him build the right character, to be a warrior.

Rich dad calls Robert out on the mismanagement of his business and makes him understand he is not running the business the way it should be. Robert takes rich dads advice and takes all the necessary actions to fix what he had messed up on. Robert has a lot of time to try and figure out who he is as a person and what he wants out of his life. He refuses to be an employee for anyone so he knows he has to educate himself to be able to move on. During this time, rich dad teaches Robert about ERISA, defined benefit plans, defined contribution plans, and how to build a financial ark to weather the perfect storm that is soon to come. Rich dad also talks about how the government is pushing the problems they have now onto the next generation to deal with which is only going to make things worse. Medicare is adding to the problem as well.

Rich dad explains to Robert that there are four types of people, there are employees, self-employed or small business owners, big business owners, and investors. He also mentions that there are three different classes of people. There is rich, middle class, and poor and rich dad explains what each class invests their time and efforts in which makes them the class that they are. All this information just makes Robert realize even more that he wants more for himself because he wants to be in the rich class as an investor or business owner. He realizes that he needs to be academically, professionally, and financially educated as well as invest his time and efforts into everything that the three classes invest their time in so he can ultimately reach the rich class. After six months of Robert facing the real world after the loss of his business, he finally is getting back on his feet and working with different business partners and even helped out at his old company for a little while. Now rich dad is stressing to Robert the things he needs to do to build his financial ark. The book ends with rich dad telling Robert about the goals he should strive to follow and how to handle himself while putting his ark together.

The Ten Things Managers Need to Know from Rich Dad’s Prophecy

Below is a list of lessons learned by the author that I feel all managers can profit from by knowing. This list may seem like common sense but many people seem to overlook these things, this list is directly quoted from the book:

  1. Friends do not always make good business partners.
  2. A company can be profitable and still be in serious financial trouble.
  3. It’s the little things, like not having enough thread that can stop the whole business.
  4. People do not always pay their bills, which means you cannot always pay your bills. People do not like when you do not pay them.
  5. Patents and trademarks are important aspects of a successful business.
  6. Loyalty can be fleeting.
  7. It is essential to have accurate financial records and accounting.
  8. You need a strong management team and a strong team of professional consultants such as lawyers and accountants.
  9. It costs a lot of money to build a business.
  10. It’s not the lack of money that kills a business. It’s more the lack of business experience and lack of personal integrity.

FULL SUMMARY

A Change in the Law… A Change in the Future

            The book begins with the author, Robert Kiyosaki, and “rich dad” talking about the success of Robert’s business. It seems as Robert is doing well with his business until rich dad looks at Robert’s financial statements. Rich dad is very unhappy with what he sees because he realizes that Robert actually owes his employees money and is in debt. Yes, Robert’s company may be getting sales orders but if there is no money coming in to pay for the resources needed to complete these orders then where is the success in that. Robert blames it on not getting collections on any of his receivables. The accounts are 120 days passed due and not much is being done to collect on them. This makes rich dad pretty furious and he explains to Robert the importance of being a responsible business owner and how he is being a thief by not paying his employees while he is driving around in nice cars and wearing fancy suits pretending everything is okay. Robert eventually owns up to the mismanagement of his business after being lectured to by rich dad in his office for a few hours. Robert takes what rich dad says into consideration and begins to truly take care of business. He goes back to his company and has a meeting with his partners about what needs to be done to start making things right. Beginning with a heart-to-heart and ending in a heated argument, the decision is made. Robert and his partners will no longer own their business. He starts making an effort to collect money from the people that owed him and for the ones who did not pay, he sent them off to the collection agency to take care of. Robert takes what money he received and pays as many of his employees and investors as he can, explains to them the situation, apologizes, and takes this as a hard earned lesson.

The Law that Changed the World

Rich dad and Robert go out to lunch and examine all the business executives and important people who are in the restaurant as well. Rich dad tells Robert how all of these so-called successful businessmen will end up with nothing because they are too caught up with what is going on right now instead of worrying about what is going to happen when they want to retire. Robert is confused as of why, so rich dad explains ERISA, which stands for Employee Retirement Income Security Act. ERISA made 401ks possible and was passed to help protect employees’ retirement money from abuse by their business owners. An employer has to match whatever the employee puts into their 401k, but it ended up benefiting employers more so because the dollar amount employers had to contribute to their employees was now significantly reduced and not to mention, if the employee didn’t contribute anything at all then neither does the employer. Going back to the executives in the restaurant is what rich dad was trying to explain to Robert, that all of those business people would rather have more money in their checks now and weren’t educated on the facets of ERISA. Rich dad then went into explaining the difference between Defined Benefit plans and Defined Contribution plans and how ERISA is going to cause a transition from DB to DC plans, He also said that so many people are unaware of this difference and that by all of these people being financially uneducated is what’s going to cause the biggest stock market crash in history.

DB plan- A retirement plan that defined the benefit or the dollar amount a retired person would receive. It is based on the number of years an employee worked for a company and when they retired they would receive a certain amount every single month from the company.

DC plan- A retirement plan that is defined by the contribution. A worker’s retirement is only as good as the contribution, if there is any at all.

Are You Ready to Face the Real World?

            Robert is trying to find himself and how he wants to live his life from this point on. He talks to a lot of people and realizes most people want that “safety” in their job and would rather be miserable in a secure well-paying job then risk not having the security or financial means. This is very understandable to Robert but that is not how he is thinking he wants his life to be. He has nothing right now due to the loss of his company and everything he once had. Robert’s real dad tried to offer him what little he could but Robert refused to accept any of it because his dad didn’t have much either and would soon be out of money as well. Robert then decided he did not want to end up like his dad so he decided to go back to school and become educated in what most people do not study. After so long of not having a job and sometimes not even being able to eat, Robert received a phone call from an old friend about a management-level job that paid well, had great benefits, a big expense account, and promise for advancement. Robert was ecstatic, he went to the many interviews and was one of the three remaining candidates the company had selected. Instead of feeling good Robert began feeling really bad inside, he was thinking I am just like my dad. Robert didn’t want to be interviewing for any job, he did not want to be an “employee” to any one.

The Nightmare Begins

The Enron scandal is covered in this chapter, it talks about the different magazine articles about the incident of who’s pointing fingers at who, and how and why it happened. The booms and busts of the stock market are briefly discussed as well as a statement made by Warren Buffett, who is reportedly America’s richest and smartest investor, he says that “Diversification is a protection against ignorance. It makes very little sense for those that know what they’re doing”. Warren isn’t saying that you shouldn’t diversify, he just doesn’t, and if you are financially educated you understand why. This book is constantly making the point of how important financial education is. Rich dad firmly believes that the main reason we will have the biggest stock market crash in history is from the lack of financial education in people. Another scary thought rich dad brings up to Robert is how so many people are can become a financial planner or financial advisor just by a two-week course that gives them a certification. He said there are very few financial advisors that actually know what they are talking about and went to a real school to learn every aspect about it. Most of these financial advisors that receive their two-week certification are just trying to sell the products of the firm they are working for, have no clue what they are talking about, and do not care what you financial future holds.

What Are Your Financial Assumptions?

Robert dedicates this chapter to the term “assume”, we all know what happens when we assume things and Robert is just trying to stress that you must never assume anything in life, whether financially or in general. Always ask questions, even to yourself. He talks about different circumstances that occurred because he assumed things. He mentions how some so-called financial planners tell you to do this, that, and the other with your money without even finding out more about you and your financial past, or whether you have any knowledge about finance to begin with. Rich dad refers to these financial planners giving you this generic advice as “fast-food financial planning.” So make sure you do not assume the person you are listening to to decide your financial future knows what they are talking about. Find a trusted source, and just because it may be a huge firm doesn’t necessarily mean they know what they are doing or that they care.

Just Because You Invest Does Not Mean You Are an Investor

Rich dad felt one of the biggest flaws in ERISA was that it forced people who are not investors to invest. These people think just because they invest money in something they are an investor, but a true investor actually receives money on a regular basis from their investment. Rich dad believes there are four types of people: an employee, a self-employed or small business owner, a big business owner, and an investor. Robert mentions three real reasons why rich dad saw the coming of the biggest stock market crash in history, which are the fact that there will be a market sell-off caused by baby boomers converting to cash, the cost of living and medical costs will go up, and the number of fools will increase.

Everyone Needs to Become an Investor

Rich dad tries to explain to his employees the importance of investing, especially for their retirement but none of them really seem interested. Robert is confused by this so rich dad explains how they are more worried about their checks being bigger now then wanting to take some out each paycheck for their 401k. Rich dad talks about the three classes of people and what each class “invests” their time and interest in and why that makes them part of that class. Rich dad also explains the three different types of education being, academic education, financial education, and professional education. He feels it is extremely important to be educated in all three.

The Cause of the Problem

The cause of the problem is all of the symptoms combined that will lead to the coming stock market crash. Symptoms such as ERISA, Enron, social security problems and Medicare. It talks about how bad off the social security system is, and that when it comes to my generation needing it, it most likely won’t be there even though we constantly contribute to it. ERISA is passing the problem on to the next generation. Every new generation gets punished for the old generation, so the problem is just getting worse and worse. It talks about the rise and fall of the Roman Empire and how America might be the next Argentina. Argentina used to be a rich industrial powerhouse but within a few years it became a poor, debt-ridden, bankrupt nation with a weak currency. It is a possibility that this could happen to American in 20-30 years unless Americans are willing to face the problem honestly and allow people and business to solve the problem once and for all instead of pushing it on to the next generation to deal with.

The Perfect Storm

The movie The Perfect Storm was used to compare the beginning of the coming of our perfect financial storm starting in the year 2000. Rich dad was watching certain changes occur that he felt will help fuel the perfect storm. These changes were that millions will be left destitute in old age, medical care will get even more expensive, terrorism will increase, Japan, currently the world’s second largest economy, is on the brink of financial collapse and depression, China will become the world’s largest economy, the world population will continue to age, Wall Street is obsolete, and big corporations are losing the public trust and failing. Rich dad also talks to Robert about the “chicken coop”, that people inside of the chicken coop want a secure job, a steady paycheck, great benefits and a secure retirement. Life outside of the chicken coop is strong, optimistic, vibrant, and filled with more opportunity than ever before. Living outside the coop is not settling for less, you are your own boss and you make things happen for yourself.

How Do You Build an Ark?

Rich dad said, “Everyone has the ability to build a financial ark to survive and flourish in the future. But you must invest time in your financial education to build an ark with a solid foundation.” You must decide how big you want your ark to be and you need to seriously commit to increasing your financial education. Savers are losers and you are not going to get nothing more than a life preserver out of that. When you want to build a big ark, a rich ark, you need to be knowledgeable in every financial aspect and you need to stay on top of all of your financial statements and billing.

Controls of Building Your Ark

The most important control of all is to take control over yourself and how you manage your money. If you can do that, you can build a rich ark and capitalize wisely. You must also be able to control your emotions. Warren Buffett often says, “If you cannot control your emotions you cannot control your money.” Rich dad has a similar statement, “Money is an emotional subject. If you cannot control your emotions, your emotions will control your money.” Education will reduce your fear thus making your more confident and patient so your fears about money and investing will start to disappear. You need to keep control over your excuses, because according to rich dad, “excuses are the words coming from the loser in you.” Your vision should be determined and optimistic, decide what you want for your future and make all the necessary changes to make it happen, simply put. Keep control over your advisors, as mentioned before you have to absolutely trust them. Remember you are the captain of your ark so, ultimately the decision is yours. Manage your time wisely. Invest in becoming an investor. Rich dad can’t stress enough the absolute need for financial education. Invest some of your time finding the long and short term reasons why you want to learn something, invest some time in learning the technical knowledge required to achieve your goals, and invest some time learning via real life trial and error.

            Rich dad suggests that as captain of your ark you need to follow these goals: always make sure you keep your word, keep an open mind and your ears tuned for change, learn to read financial statements, use technology, watch for bigness (when mutual fund companies, real estate, and careers become to big, they are about to decline or be replaced by something or someone new), watch for changes in the law, watch for inflation, and pay close attention to government’s handling of its social programs.

VIDEO  LOUNGE

LINK: https://www.youtube.com/watch?v=vIpkMDj5Hvc&feature=related

This video is of Robert Kiyosaki himself explaining the four points that business owners and investors need to live by. That is to have a good partner, make sure price equals value because you don’t want to buy high and sell low, be financially educated and financially stable, and make sure you manage all of your decisions wisely. A weakness in any of these points can be detrimental to all of the points as a whole.

PERSONAL INSIGHTS

I think the author is one of the most brilliant people around because he had some truly insightful information that kept me intrigued. Reading this book was a wake up call that seriously makes me want to get financially educated and start preparing my “ark” so I have safety from the “storm” and for my retirement. I know things are getting worse and I know a lot of people aren’t concerned like they should be. Rich dad and Robert made some extremely good points that are now drilled into my head and I trust what they have mentioned because they are both very successful and well off.

If I were the author of the book, I would have done these three things differently:

  1. I would have given a more detailed way of how to start preparing your financial ark.
  2. I would have explained a way to start your own business on limited financial means.
  3. I would have provided my opinion on what I think would be the best investment.

Reading this book made me think differently about the topic in these ways:

  1. I now realize even more how the government is screwing us over and making the problem worse for the next generation.
  2. I think differently about finance now because I realize it is imperative to become financially educated if you want to be able to retire.
  3. I think differently about financial advisors because I question how much they really know and whether or not they are just using some sales pitch.

I’ll apply what I’ve learned in this book in my career by:

  1. This book has encouraged me to want to be a business owner and learn how to invest. I don’t want to be a person inside of the chicken coop. I want to be my own boss and have money coming in from several different investments.
  2. This book has made me want to stay on top of changes in the law that could affect my job and my financial future.
  3. This book has encouraged me to invest in a DC plan if my future employment offers it until I am able to own my own business.

Here is a sampling of what others have said about the book and its author:

From Publishers Weekly

  1. “When the first baby boomers celebrate their 70th birthdays in 2016, according to rich dad (the author’s financial mentor and father of his boyhood chum), a massive stock market crash will ensue. Joining half a dozen popular Rich Dad books, this volume continues Kiyosaki’s eloquent yet simple survival instructions to investors present and future. Kiyosaki’s wealth stems from lessons learned at rich dad’s balance sheets, and here he deftly illustrates those complex financial truths. He encourages readers-many of whom suffer from what he sees as the dismal lack of financial education in the school system-to understand factors such as ERISA, the investor-unfriendly retirement law for which rich dad vilified the government, and the overabundance of “white bread” financial advice for the masses. Wall Street has nothing to gain by smartening up investors, Kiyosaki warns, so it’s up to people to educate themselves. Those convinced that reading financial statements is an activity solely for the sophisticated and the moneyed will be reassured by Kiyosaki’s analogies-Noah’s ark is a primary one-as he colorfully covers a host of investing esoterica and scrutinizes details every investor should recognize. “Investing time when I had no time and investing money when I had very little money is what made me rich,” he says.
    Copyright 2002 Reed Business Information, Inc.”
  1. “Rich Dad’s Prophecy is most certainly a must read book for anyone who has money invested, especially in 401 (k) plans. While some of the information in RDP is similar to Kiyosaki’s earlier books, the pension, retirement and 401 (k) is fresh, startling and hopefully alarming to anyone who plans on investing their money between now and 2016. 2016 is the year when the bulk of the baby boomers will be forced to liquidate their retirement funds. When this happens, a major stock market crash is expected (no kidding!) that surpass the bear market from 2000 to 2002.

Another problem is what kind of money will current savers have in their 401 (k)s? For example, before going into self employment, I worked in a local office for one of the top 6 banks in the USA and had been putting all I could into my 401 (k) savings plan. Despite this being one of the “Big 6” Banks, matching by the bank was about average (and any matching reflected in reduced wages), options to invest in were pathetically weak and the bank would match us only with shares of Bank One stock.

After reading RDP and going into self employment, I rolled my 401 (k) into a self directed IRA with a brokerage firm. I now choose my investments between stocks, mutual funds and bonds or even Tax Liens, Discounted Mortgages and Real Estate. I’m in control, not my employer.

The only real benefit of a 401 (k) is the borrowing provision which unfortunately too many so called financial experts discourage. And after the Enron issue, who wants to have that much money in company stock?

Kiyosaki is alerting people and none too soon. I am certain that all of the one star reviews are from brokers, financial planners and benefits directors from companies that hope that you blindly follow their advice even it means not having anything for retirement. I cannot emphasize the importance of reading RDP and more importantly, following the advice. To repeat, Rich Dad’s Prophecy is definitely A MUST READ!”

BIBLIOGRAPHY

Editorial Reviews. Publisher’s Weekly. https://www.amazon.com/Rich-Dads-Prophecy-Coming-Yourself/dp/0446530867

Volatyier. Eric. Reviews on Rich Dad’s Prophecy. https://www.amazon.com/Rich-Dads-Prophecy-Coming-Yourself/dp/0446530867 28 Oct. 2003.

CONTACT INFORMATION

To contact the author of this “Summary and Review of Rich Dad’s Prophecy, please email Jessica.erceg@selu.edu.

Biography

David C. Wyld (dwyld.kwu@gmail.com) is the Robert Maurin Professor of Management at Southeastern Louisiana University in Hammond, Louisiana. He is a management consultant, researcher/writer, and executive educator. His blog, Wyld About Business, can be viewed at https://wyld-business.blogspot.com/. He also serves as the Director of the Reverse Auction Research Center (https://reverseauctionresearch.blogspot.com/), a hub of research and news in the expanding world of competitive bidding. Dr. Wyld also maintains compilations of works he has helped his students to turn into editorially-reviewed publications at the following sites:

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