Rich Dad, Poor Dad Part 4

"No, that would be a waste of time," said rich dad. "Emotions are what make us human. Make us real. The word 'emotion' stands for energy in motion. Be truthful about your emotions, and use your mind and emotions in your favor, not against yourself."

"Whoa!" said Mike.

"Don't worry about what I just said. It will make more sense in years to come. just be an observer, not a reactor, to your emotions. Most people do not know that it's their emotions that are doing the thinking. Your emotions are your emotions, but you have got to learn to do your own thinking."

"Can you give me an example?" I asked.

"Sure," replied rich dad. "When a person says, 'I need to find a job,' it's most likely an emotion doing the thinking. Fear of not having money generates that thought."

"But people do need money if they have bills to pay," I said.

"Sure they do," smiled rich dad. "All I'm saying is that it's fear that is all too often doing the thinking."

"I don't understand," said Mike.

"For example," said rich dad. "If the fear of not having enough money arises, instead of immediately running out to get a job so they can earn a few bucks to kill the fear, they instead might ask themselves this question. 'Will a job be the best solution to this fear over the long run?' In my opinion, the answer is 'no.' Especially when you look over a person's lifetime. A job is really a short-term solution to a long-term problem."

"But my dad is always saying, 'Stay in school, get good grades, so you can find a safe, secure job.' I spoke out, somewhat confused.

"Yes, I understand he says that," said rich dad, smiling. "Most people recommend that, and it's a good idea for most people. But people make that recommendation primarily out of fear."

"You mean my dad says that because he's afraid?"

"Yes," said rich dad. "He's terrified that you won't be able to earn money and won't fit into society. Don't get me wrong. He loves you and wants the best for you. And I think his fear is justified. An education and a job are important. But it won't handle the fear. You see, that same fear that makes him get up in the morning to earn a few bucks is the fear that is causing him to be so fanatical about you going to school."

"So what do you recommend?" I asked.

"I want to teach you to master the power of money. Not be afraid of it. And they don't teach that in school. If you don't learn it, you become a slave to money."

It was finally making sense. He did want us to widen our views. To . see what Mrs. Martin could not see, his employees could not see, or my dad for that matter. He used examples that sounded cruel at the time, but I've never forgotten them. My vision widened that day, and I could begin to see the trap that lay ahead for most people.

"You see, we're all employees ultimately. We just work at different levels," said rich dad. "I just want you boys to have a chance to avoid the trap. The trap caused by those two emotions, fear and desire. Use them in your favor, not against you. That's what I want to teach you. I'm not interested in just teaching you to make a pile of money. That won't handle the fear or desire. If you don't first handle fear and desire, and you get rich, you'll only be a high-paid slave."

"So how do we avoid the trap?" I asked.

"The main cause of poverty or financial struggle is fear and ignorance, not the economy or the government or the rich. It's selfinflicted fear and ignorance that keeps people trapped. So you boys go to school and get your college degrees. I'll teach you how to stay out of the trap."

The pieces of the puzzle were appearing. My highly educated dad had a great education and a great career. But school never told him how to handle money or his fears. It became clear that I could learn different and important things from two fathers.

"So you've been talking about the fear of not having money. How does the desire of money affect our thinking?" Mike asked.

"How did you feel when I tempted you with a pay raise? Did you notice your desires rising?"

We nodded our heads.

"By not giving in to your emotions, you were able to delay your reactions and think. That is most important. We will always have emotions of fear and greed. From here on in, it is most important for you to use those emotions to your advantage and for the long term, and not simply let your emotions run you by controlling your thinking. Most people use fear and greed against themselves. That's the start of ignorance. Most people live their lives chasing paychecks, pay raises and job security because of the emotions of desire and fear, not really questioning where those emotion-driven thoughts are leading them. It's just like the picture of a donkey, dragging a cart, with its owner dangling a carrot just in front of the donkey's nose. The donkey's owner may be going where he wants to go, but the donkey is chasing an illusion. Tomorrow there will only be another carrot for the donkey."

"You mean the moment I began to picture a new baseball glove, candy and toys, that's like a carrot to a donkey?" Mike asked.

"Yeah. And as you get older, your toys get more expensive. A new car, a boat and a big house to impress your friends," said rich dad with a smile. "Fear pushes you out the door, and desire calls to you. Enticing you toward the rocks. That's the trap."

"So what's the answer," Mike asked.

"What intensifies fear and desire is ignorance. That is why rich people with lots of money often have more fear the richer they get. Money is the carrot, the illusion. If the donkey could see the whole picture, it might rethink its choice to chase the carrot."

Rich dad went on to explain that a human's life is a struggle between ignorance and illumination.

He explained that once a person stops searching for information and knowledge of one's self, ignorance sets in. That struggle is a moment-to-moment decision-to learn to open or close one's mind.

"Look, school is very, very important. You go to school to learn a skill or profession so as to be a contributing member of society. Every culture needs teachers, doctors, mechanics, artists, cooks, business people, police officers, firefighters, soldiers. Schools train them so our culture can thrive and flourish," said rich dad. "Unfortunately, for many people, school is the end, not the beginning."

There was a long silence. Rich dad was smiling. I did not comprehend everything he said that day. But as with most great teachers, whose words continue to teach for years, often long after they're gone, his words are still with me today.

"I've been a little cruel today," said rich dad. "Cruel for a reason. I want you to always remember this talk. I want you to always think of Mrs. Martin. I want you always to think of the donkey. Never forget, because your two emotions, fear and desire, can lead you into life's biggest trap, if you're not aware of them controlling your thinking. To spend your life living in fear, never exploring your dreams, is cruel. To work hard for money, thinking that money will buy you things that will make you happy is also cruel. To wake up in the middle of the night terrified about paying bills is a horrible way to live. To live a life dictated by the size of a paycheck is not really a life. Thinking that a job will make you feel secure is lying to yourself. That's cruel, and that's the trap I want you to avoid, if possible. I've seen how money runs people's lives. Don't let that happen to you. Please don't let money run your life."

A softball rolled under our table. Rich dad picked it up and threw it back.

"So what does ignorance have to do with greed and fear?" I asked.

"Because it is ignorance about money that causes so much greed and so much fear," said rich dad. "Let me give you some examples. A doctor, wanting more money to better provide for his family, raises his fees. By raising his fees, it makes health care more expensive for everyone. Now, it hurts the poor people the most, so poor people have worse health than those with money.

"Because the doctors raise their rates, the attorneys raise their rates. Because the attorneys' rates have gone up, schoolteachers want a raise, which raises our taxes, and on and on and on. Soon, there will be such a horrifying gap between the rich and the poor that chaos will break out and another great civilization will collapse. Great civilizations collapsed when the gap between the haves and havenots was too great. America is on the same course, proving once again that history repeats itself, because we do not learn from history. We only memorize historical dates and names, not the lesson.

"Aren't prices supposed to go up?" I asked.

"Not in an educated society with a well-run government. Prices should actually come down. Of course, that is often only true in theory. Prices go up because of greed and fear caused by ignorance. If schools taught people about money, there would be more money and lower prices, but schools focus only on teaching people to work for money, not how to harness money's power."

"But don't we have business schools?" Mike asked. "Aren't you encouraging me to go to business school for my master's degree?"

"Yes," said rich dad. "But all too often, business schools train employees who are sophisticated bean counters. Heaven forbid a bean counter takes over a business. All they do is look at the numbers, fire people and kill the business. I know because I hire bean counters. All they think about is cutting costs and raising prices, which cause more problems. Bean counting is important. I wish more people knew it, but it, too, is not the whole picture," added rich dad angrily.

"So is there an answer?" asked Mike.

"Yes," said rich dad. "Learn to use your emotions to think, not think with your emotions. When you boys mastered your emotions, first by agreeing to work for free, I knew there was hope. When you again resisted your emotions when I tempted you with more money, you were again learning to think in spite of being emotionally charged. That's the first step."

"Why is that step so important" I asked.

"Well, that's up to you to find out. If you want to learn, I'll take you boys into the briar patch. That place where almost everyone else avoids. I'll take you to that place where most people are afraid to go. If you go with me, you'll let go of the idea of working for money and instead learn to have money work for you."

"And what will we get if we go with you. What if we agree to learn from you? What will we get?" I asked.

"The same thing Briar Rabbit got," said rich dad. "Freedom from the Tar Baby."

"Is there a briar patch?" I asked.

"Yes," said rich dad. "The briar patch is our fear and our greed. Going into our fear and confronting our greed, our weaknesses, our neediness is the way out. And the way out is through the mind, by choosing our thoughts."

"Choosing our thoughts?" Mike asked, puzzled.

"Yes. Choosing what we think rather than reacting to our emotions. Instead of just getting up and going to work to solve your problems, just because the fear of not having the money to pay your bills is scaring you. Thinking would be taking the time to ask yourself a question. A question like, 'Is working harder at this the best solution to this problem?' Most people are so terrified at not telling themselves the truth-that fear is in control-that they cannot think, and instead run out the door. Tar baby is in control. That's what I mean by choosing your thoughts."

"And how do we do that?" Mike asked.

"That's what I will be teaching you. I'll be teaching you to have a choice of thoughts to consider, rather than knee-jerk reacting, like gulping down your morning coffee and running out the door.

"Remember what I said before: A job is only a short-term solution to a long-term problem. Most people have only one problem in mind, and it's short term. It's the bills at the end of the month, the Tar Baby. Money now runs their lives. Or should I say the fear and ignorance about money. So they do as their parents did, get up every day and go work for money. Not having the time to say, 'Is there another way?' Their emotions now control their thinking, not their heads."

"Can you tell the difference between emotions thinking and the head thinking?" Mike asked.

"Oh, yes. I hear it all the time," said rich dad. "I hear things like, 'Well, everyone has to work.' Or 'The rich are crooks.' Or 'I'll get another job. I deserve this raise. You can't push me around.' Or 'I like this job because it's secure.' Instead of, 'Is there something I'm missing here?' which breaks the emotional thought, and gives you time to think clearly."

I must admit, it was a great lesson to be getting. To know when someone was speaking out of emotions or out of clear thought. It was a lesson that served me well for life. Especially when I was the one speaking out of reaction and not from clear thought.

As we headed back to the store, rich dad explained that the rich really did "make money." They did not work for it. He went on to explain that when Mike and I were casting 5-cent pieces out of lead, thinking we were making money, we were very close to thinking the way the rich think. The problem was that it was illegal for us to do it. It was legal for the government and banks to do it, but not us. He explained that there are legal ways to make money and illegal ways.

Rich dad went on to explain that the rich know that money is an illusion, truly like the carrot for the donkey. It's only out of fear and greed that the illusion of money is held together by billions of people thinking that money is real. Money is really made up. It was only because of the illusion of confidence and the ignorance of the ma.s.ses that the house of cards stood standing. "In fact," he said, "in many ways the donkey's carrot was more valuable than money."

He talked about the gold standard that America was on, and that each dollar bill was actually a silver certificate. What concerned him was the rumor that we would someday go off the gold standard and our dollars would no longer be silver certificates.

"When that happens, boys, all h.e.l.l is going to break loose. The poor, the middle cla.s.s and the ignorant will have their lives ruined simply because they will continue to believe that money is real and that the company they work for, or the government, will look after them."

We really did not understand what he was saying that day, but over the years it made more and more sense.

Seeing What Others Miss As he climbed into his pickup truck, outside of his little convenience store, he said, "Keep working boys, but the sooner you forget about needing a paycheck, the easier your adult life will be. Keep using your brain, work for free, and soon your mind will show you ways of making money far beyond what I could ever pay you. You will see things that other people never see. Opportunities right in front of their noses. Most people never see these opportunities because they're looking for money and security, so that's all they get. The moment you see one opportunity, you will see them for the rest of your life. The moment you do that, I'll teach you something else. Learn this, and you'll avoid one of life's biggest traps. You'll never, ever, touch that Tar Baby."

Mike and I picked up our things from the store and waved goodbye to Mrs. Martin. We went back to the park, to the same picnic bench, and spent several more hours thinking and talking.

We spent the next week at school, thinking and talking. For two more weeks, we kept thinking, talking, and working for free.

At the end of the second Sat.u.r.day, I was again saying goodbye to Mrs. Martin and looking at the comic-book stand with a longing gaze. The hard thing about not even getting 30 cents every Sat.u.r.day was that I didn't have any money to buy comic books. Suddenly, as Mrs. Martin was saying goodbye to Mike and me, I saw something she was doing that I had never seen her do before. I mean, I had seen her do it, but I never took notice of it.

Mrs. Martin was cutting the front page of the comic book in half. She was keeping the top half of the comic book cover and throwing the rest of the comic book into a large brown cardboard box. When I asked her what she did with the comic books, she said, "I throw them away. I give the top half of the cover back to the comic-book distributor for credit when he brings in the new comics. He's coming in an hour."

Mike and I waited for an hour. Soon the distributor arrived and I asked him if we could have the comic books. To which he replied, "You can have them if you work for this store and do not resell them."

Our partnership was revived. Mike's mom had a spare room in the bas.e.m.e.nt that no one used. We cleaned it out, and began piling hundreds of comic books in that room. Soon our comic-book library was open to the public. We hired Mike's younger sister, who loved to study, to be head librarian. She charged each child 10 cents admission to the library, which was open from 2:30 to 4:30 p.m. every day after school. The customers, the children of the neighborhood, could read as many comics as they could in two hours. It was a bargain for them since a comic costs 10 cents each, and they could read five or six in two hours.

Mike's sister would check the kids as they left, to make sure they weren't borrowing any comic books. She also kept the books, logging in how many kids showed up each day, who they were, and any comments they might have. Mike and I averaged $9.50 per week over a threemonth period. We paid his sister $1 a week and allowed her to read the comics for free, which she rarely did since she was always studying.

Mike and F kept our agreement by working in the store every Sat.u.r.day and collecting all the comic books from the different stores. We kept our agreement to the distributor by not selling any comic books. We burned them once they got too tattered. We tried opening a branch office, but we could never quite find someone as dedicated as Mike's sister we could trust.

At an early age, we found out how hard it was to find good staff.

Three months after the library first opened, a fight broke out in the room. Some bullies from another neighborhood pushed their way in and started it. Mike's dad suggested we shut down the business. So our comic-book business shut down, and we stopped working on Sat.u.r.days at the convenience store. Anyway, rich dad was excited because he had new things he wanted to teach us. He was happy because we had learned our first lesson so well. We had learned to have money work for us. By not getting paid for our work at the store, we were forced to use our imaginations to identify an opportunity to make money. By starting our own business, the comic-book library, we were in control of our own finances, not dependent on an employer. The best part was that our business generated money for us, even when we weren't physically there. Our money worked for us. Instead of paying us money, rich dad had given us so much more.

CHAPTER THREE.

Lesson Two:Why Teach Financial Literacy?

In 1990, my best friend, Mike, took over his father's empire and is, in fact, doing a better job than his dad did. We see each other once or twice a year on the golf course. He and his wife are wealthier than you could imagine. Rich dad's empire is in great hands, and Mike is now grooming his son to take his place, as his dad had groomed us.

In 1994, I retired at the age of 47, and my wife, Kim, was 37. Retirement does not mean not working. To my wife and me, it means that barring unforeseen cataclysmic changes, we can work or not work, and our wealth grows automatically, staying way ahead of inflation. I guess it means freedom. The a.s.sets are large enough to grow by themselves. It's like planting a tree. You water it for years and then one day it doesn't need you anymore. It's roots have gone down deep enough. Then, the tree provides shade for your enjoyment.

Mike chose to run the empire and I chose to retire.

Whenever I speak to groups of people, they often ask what I would recommend or what could they do? "How do they get started?" "Is there a good book I would recommend?" "What should they do to prepare their children?" "What is the secret to success?" "How do I make millions?" I am always reminded of this article I was once given. It goes as follows.

THE RICHEST BUSINESSMEN.

In 1923 a group of our greatest leaders and richest businessmen held a meeting at the Edgewater Beach hotel in Chicago. Among them were Charles Schwab, head of the largest independent steel company; Samuel Instill, president of the world's largest utility; Howard Hopson, head of the largest gas company; Ivar Kreuger president of the International Match Co., one of the world's largest companies at that time; Leon Frazier, president of the Bank of International Settlements; Richard Whitney, president of the New York Stock Exchange; Arthur Cotton and Jesse Livermore, two of the biggest stock speculators; and Albert Fall, a member of President Harding's cabinet. Twenty five years later nine of them (those listed above) ended as follows. Schwab died penniless after living for five years on borrowed money. Instill died broke living in a foreign land. Kreuger and Cotton also died broke. Hopson went insane. Whitney and Albert Fall were just released from prison. Fraser and Livermore committed suicide.

I doubt if anyone can say what really happened to these men. If you look at the date, 1923, it was just before the 1929 market crash and the Great Depression, which I suspect had a great impact on these men and their lives. The point is this: Today we live in times of greater and faster change than these men did. I suspect there will be many booms and busts in the next 25 years that will parallel the ups and downs these men faced. I am concerned that too many people are focused too much on money and not their greatest wealth, which is their education. If people are prepared to be flexible, keep an open mind and learn, they will grow richer and richer through the changes. If they think money will solve problems, I am afraid those people will have a rough ride. Intelligence solves problems and produces money. Money without financial intelligence is money soon gone.

Most people fail to realize that in life, it's not how much money you make, it's how much money you keep. We have all heard stories of lottery winners who are poor, then suddenly rich, then poor again. They win millions and are soon back to where they started. Or stories of professional athletes, who, at the age of 24, are earning millions of dollars a year, and are sleeping under a bridge by age 34. In the paper this morning, as I write this, there is a story of a young basketball player who a year ago had millions. Today, he claims his friends, attorney and accountant took his money, and now he works at a car wash for minimum wage.

He is only 29. He was fired from the car wash because he refused to take off his championship ring as he was wiping off the cars, so his story made the newspaper. He is appealing his termination, claiming hardship and discrimination and that the ring is all he has left. He claims that if you take that away, he'll crumble.

In 1997, I know so many people who are becoming instant millionaires. It's the Roaring '20s one more time. And while I am glad people have been getting richer and richer, I only caution that in the long run, it's not how much you make, it's how much you keep, and how many generations you keep it.

So when people ask, "Where do I get started?" or "Tell me how to get rich quick," they often are greatly disappointed with my answer. I simply say to them what my rich dad said back to me when I was a little kid. "If you want to be rich, you need to be financially literate."

That idea was drummed into my head every time we were together. As I said, my educated dad stressed the importance of reading books, while my rich dad stressed the need to master financial literacy.

If you are going to build the Empire State Building, the first thing you need to do is dig a deep hole and pour a strong foundation. If you are going to build a home in the suburbs, all you need to do is pour a 6-inch slab of concrete. Most people, in their drive to get rich, are trying to build an Empire State Building on a 6-inch slab.

Our school system, having been created in the Agrarian Age, still believes in homes with no foundation. Dirt floors are still the rage. So kids graduate from school with virtually no financial foundation. One day, sleepless and deep in debt in suburbia, living the American Dream, they decide that the answer to their financial problems is to find a way to get rich quick.

Construction on the skysc.r.a.per begins. It goes up quickly, and soon, instead of the Empire State Building, we have the Leaning Tower of Suburbia. The sleepless nights return.

As for Mike and me in our adult years, both of our choices were possible because we were taught to pour a strong financial foundation when we were just kids.

Now, accounting is possibly the most boring subject in the world. It also could be the most confusing. But if you want to be rich, long term, it could be the most important subject. The question is, how do you take a boring and confusing subject and teach it to kids? The answer is, make it simple. Teach it first in pictures.

My rich dad poured a strong financial foundation for Mike and me. Since we were just kids, he created a simple way to teach us. For years he only drew pictures and used words. Mike and I understood the simple drawings, the jargon, the movement of money, and then in later years, rich dad began adding numbers. Today, Mike has gone on to master much more complex and sophisticated accounting a.n.a.lysis because he has had to. He has a billion-dollar empire to run. I am not as sophisticated because my empire is smaller, yet we come from the same simple foundation. In the following pages, I offer to you the same simple line drawings Mike's dad created for us. Though simple, those drawings helped guide two little boys in building great sums of wealth on a solid and deep foundation.

Rule One. You must know the difference between an a.s.set and a liability, and buy a.s.sets. If you want to be rich, this is all you need to know. It is Rule No. 1. It is the only rule. This may sound absurdly simple, but most people have no idea how profound this rule is. Most people struggle financially because they do not know the difference between an a.s.set and a liability.

"Rich people acquire a.s.sets. The poor and middle cla.s.s acquire liabilities, but they think they are a.s.sets"

When rich dad explained this to Mike and me, we thought he was kidding. Here we were, nearly teenagers and waiting for the secret to getting rich, and this was his answer. It was so simple that we had to stop for a long time to think about it.

"What is an a.s.set?" asked Mike.