Tuesday, February 8, 2011

Robert Kiyosaki's Who Took My Money

Recently, I finished reading this book from Robert Kiyosaki, which I think is a good read after Rich Dad, Poor Dad.

In this book, Robert stressed on the three asset classes (business, real estate and paper assets), the velocity of money, and the accelerators for money. He stresses a lot on using Other People's Money (OPM) and Other People's Time (OPT).

The reason why he thinks employees have the greatest risks is because
1) you are not guaranteed any job security at all
2) your income is taxed after expenditure, which doesn't make sense to him

As a business owner, while interviewing for potential staff, he looked around and saw all the young guys, and thought to himself: "I wouldn't hire myself". The reasons, he mentioned, included being older than everyone else, more expensive than everyone else, and finally, less technologically savvy.

In addition, his purchases of properties, assets, etc, are all done and protected with legal entities. These are company costs, and are all expenses before taxes. The amount of savings is substantial when a large sum of money is involved. To him, taxes are the single greatest expense.

Cash Flow vs Capital Gains
In his book, he likened about Cash Flow vs Capital Gains to Dairy Farmers vs Cattle Ranchers. The main difference between the two is that both have cattle as assets, but both treat their assets differently, and operate via different business models. To him, true investors invest for cash flows, and gamblers are there for capital gains. "Capital gains is the dream of gamblers. When you invest for cash flow, you are investing in a money-back guarantee. If you invest in capital gains, you invest in hope. The biggest thief of all is hope."

While he emphasizes on building cash flow, he does invest for capital gains as well. It is all about a matter of priorities.

Building cash flow is similar to building pipelines, and expanding the cash flow is about expanding the diameter of the pipelines. Robert mentioned how he move cash flows from one assets into another new asset, and then repeat for a 3rd asset, and this process continues. Bringing down to more layman terms, it is a little similar to buying a dividend counter, then use the dividends to buy another dividend counter, and so on. The big difference is that Robert does it with leverage, while we don't do the same for paper assets.

While some might view leverage as risky, I do agree with Robert that this is a matter of perceptions and financial intelligence. The same event viewed with different people eyes will result in different conclusions. Again, it can be analogous to a maths question seen through my eyes and my students' eyes. I will most likely find it much easier than they do.

Banker's View

There was a little interesting anecdote about a banker's view on who to give loans too. Robert asked a banker whether the banker would loan him money to buy mutual funds. The reply was negative. But the banker would consider loaning him money if he was to invest in business or real estate.

The banker replied that he won't loan money to buy mutual funds, but he would consider loaning money for a business start up or for purchasing a piece of real estate.


I like the sentence. Those who need insurance are probably those who cannot get insurance anymore.
How true this is :x

5 considerations for each investment

1) Earn / Create
==> How is it going to help you generate your cash flow?

2) Manage
==> How are you going to manage this investment?

3) Leverage
==> How much leverage can you get for your investment?

4) Protect
==> How are you going to maximise your profits, and protect it from creditors?

5) Exit
==> How are you getting back your original investment money back?

The 4 quarters of our life

This is another interesting way to see how our life is. Basically, we can assume that we start work at the age of 25 and retire at the age of 65, working a total of 40 years.

The 4 quarters are each of 10 years, which means
1st quarter: 25 ~ 35
2nd quarter: 35 ~ 45
3rd quarter: 45 ~ 55
4th quarter: 55 ~ 65

Basically, we aim to win in every quarter. However, winning in one quarter doesn't mean you will definitely win in the other quarter. Things could change drastically.

While this is an interesting way to divide our working lifespan, to be honest, I only found this portion interesting, but how it really applies, I could not yet fully comprehend.

All in all, I do like this book. It's a refreshing read as it is quite different from Robert's Rich Dad, Poor Dad. There are a number of things that were mentioned (but I didn't write down) on what businessmen really do to protect and accelerate their networth. You could borrow from the National Library for a read.


  1. momo,

    food for thought:


  2. Hi Issac,

    We have Kiyosaki's reply:

    Truth is, we need to adopt a critical mind to everything we read. It's not what we blindly follows that matters; it's how our brain process the multitude of information out there that truly matters.

    For my post, I merely extracted what I thought was useful for me. I omitted quite a few other pointers that were raised... Selective absorption I would say. :)

  3. Hi JW,

    I like some of his ideas but his comments regarding paper investments smell of snobbery. I almost bought one of his books a year ago but I took some time to flip through it and decided not to buy it:

    Conspiracy of the rich.

  4. Hi AK,

    I think I have a softcopy of that book. I could email you. He wrote it online, and I saved it last time as he wrote it.

    1. can you email it to muyifad@gmail.com

  5. Robert can be provocative - which is expected as I will do the same if I want to sell books!

    I agree that having a business and real estate (can see and touch, or real assets) can be more rewarding than paper assets - the rich accumulate businensses and real estate and then convert them to paper assets to sell to me ;)

    But part of financial literacy is knowing myself. I won't succeed at business (too lazy; it's a lot of work). That leaves me with real estate and paper asset investments.

    I can "quit" at the 2nd quarter by just having paper assets for now. Not rich; but can survive with passive income. But one day will defintely invest in 2nd property. 2 out of 3 ain't so bad.....

    We walk our own path.

  6. Hi Singapore Man of Leisure,

    you are definitely right. The book also mentioned something about one handles the synergy between the different assets. Robert gave 2 examples
    1) Donald Trump, who is good at real estate and business
    2) Warren Buffett, who is good at paper assets and business

    These two examples he raised were for showing that even if you have 2 out of the 3 asset classes, as long as you are financially well trained to synergise them, you will do very well.

  7. Yeah I read this book too ~ awesome ! and so your blog !

  8. Hi engwei!

    How's your new job?

  9. haha still a lot of tedious routine to do .. think I like my first job the most .. lol ..


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