Wednesday, September 7, 2011

One Wonders How Dad Stays Rich

When someone starts to lose financial standing, as you might expect and very well may have experienced firsthand, they start to worry about what they're going to do about it. Scaling one's life down is a difficult, difficult thing. As the situation gets more and more serious, and the consequences more and more dire, the person gets more and more worried, angry, despondent.

And, sometimes, panicky and desperate for help. Any kind of help.

When this happens, the people with the resources to potentially do something can do a couple different things. They can step in and help. They can... not step in and help. Or, if they're evil, they can step in and take advantage of the person losing their money in order to take even more of their money even faster.

Which brings us to our subject of the day, a financial seminar that has been advertised recently on WIBA, 101.5 FM in Madison. Perhaps you've heard similar ads at some point. The seminar- free, it's noted- claims to be based on the book Rich Dad, Poor Dad, and advertised four teaser topics.

Try not to laugh at the four teaser topics.

1. "Your home is not an asset."
2. "Why you may not want to diversify."
3. "Why you may not want to invest in 401K's or mutual funds."
4. "Why saving money will never make you rich."

It doesn't even seem necessary to attend the seminar to see in what direction things are clearly heading. Knowing nothing except the content of the ad, most of my co-workers burst into open laughter. (The only one who didn't, didn't out of sadness that people get taken in by things like that.) You're being asked to take some of the most basic, fundamental, taken-for-granted tenets of investing, up to and including the concept of saving money, and are then told to throw it all in the garbage.

And when you do start to dig, it's not particularly hard to guess the kind of words that are going to pop up. "Exposed." "Scam." "Investigates." "Rich Dad" is Robert Kiyosaki, and I am far from the first to get on him. ABC's 20/20, for example, took a run at Kiyosaki back in 2006. Three kids were given $1,000 and told that they had 20 days to invest it in anything they wanted, as long as it was legal and ethical. At the end of the month, they could keep any profit they got.

That was pretty much all they got told. And that was the problem. One kid in fact turned a profit of $243, though only after managing to get a piece of actual advice- namely, 'promote heavily'- halfway through the time period. Another made $540, but was penalized, and berated by Kiyosaki, because he gave it all to charity, namely public schools in his hometown of Tulsa, Oklahoma.

Take a second to contemplate that.

The third not only lost the $1,000, but put in another $1,000 of her own money and got nothing back. This was after spending the first week with no idea what she was doing. You might think someone who had gotten expert advice would have been able to avoid such a performance.

And this is the primary criticism of Kiyosaki, both from the kids and more generally: that he DOESN'T give actual advice, merely a bunch of abrasive cheerleading. This criticism has been leveled ever since his (self-published) book came out in 1997, though it didn't stop him from making an appearance on Oprah, which, knowing Oprah's ability to sell books, is probably how the book took off. You can take any article about Kiyosaki that's been written since Rich Dad, Poor Dad hit it big and it will read pretty much the same as the others. Here's one from 2002, written by Slate's Rob Walker.

The book itself is described by Walker as blunt yet bland common-sense advice- much of which isn't even good advice- disguising advertisements for Kiyosaki's other financial-advice enterprises. When anecdotes are provided as to how Kiyosaki himself got rich- his substitute for more detailed advice- it turns out to be glossed-over stories of real estate speculation.

(Please refer again to teaser topic #1. Try to reconcile it with the anecdotes.)

The Sydney Morning Herald was blunter upon their encounter with Kiyosaki in 2004, using him as a foothold to attack get-rich-quick empires in general. This article quotes investment adviser John T. Reed, who was even blunter than them: "Rich Dad, Poor Dad is one of the dumbest financial advice books I have ever read. It contains many factual errors and numerous extremely unlikely accounts of events that supposedly occurred."

Reed's full double-barrel unloading- or actually, unloading of one of those arsenals you see in propaganda war posters- can be found here, but be warned that you absolutely will not be able to get through the entire page in one sitting unless you are Rain Man and also you have meals delivered directly to your computer. It is a rant of Biblical proportions, unlike anything I have ever seen on the Internet, and has become the gold standard of investigation against Kiyosaki.

Among Reed's charges:

*Kiyosaki advocates making friends so that you can better engage in insider trading ("That's what friends are for"),
*That he advises that vacations to Hawaii be deducted as business expenses,
*That he counts his cat as a business partner, and
*That he endorses a Texan proverb that goes "If you're going to go broke, go broke big."

Independent research- which included direct clips from Rich Dad, Poor Dad available through Google Books- has shown nothing to dispute any of these charges.

The Morning Herald also notes why the seminars are free: because there's no paid labor at the seminars. The staff is volunteer-only.

And the seminar itself has been covered as well, by CBS Moneywatch's Allan Roth. Real-estate speculation was pressed some more, as well as the concept of passive income (which here consisted basically of telling yourself how much of it you wanted), and sales pitches for courses that will run you up to $45,000. The first of the classes, a $500 three-day class, is little more than a play of Kiyosaki's board game, Cashflow 101; an urging to increase your credit card limit as much as possible on Day 1; a sales pitch for the next set of classes on Day 2 at prices that immediately bring those jacked-up credit card limits into play; and active eviction of anyone that starts to realize it's a scam, which usually happens around Day 3 with people that decided to come back anyway to warn the others. (In emergency situations, Day 3 can be abruptly cut short.)

Roth walked out of the free seminar after one hour and referred the reader to yet another source that had gone after the Rich Dad franchise, the CBC program Marketplace, which had actually managed to sit through the entire thing. Kiyosaki, it should be noted, was not present at either free seminar.

Further criticism of Kiyosaki can be found at the Fraud Files Blog, the Consumerist, The Simple Dollar, the Motley Fool, WorkAtHomeTruth, the Better Business Bureau, and a website for people who've already been conned called Rich Daddy Nightmares.

Guys like Kiyosaki are among the most dangerous people you can possibly get involved with when you're in a bad financial situation. At that point, you need sound advice that has been proven to be effective in getting people back on their feet. Advice like Kiyosaki's, seemingly designed to separate you from as much of your money as possible as quickly as possible without actually setting fire to it, will merely finish you off.

By the way: in late June, Kiyosaki advised investing in precious metals, buying a gun and stockpiling food, saying "Remember this, the police cannot prevent a crime, only you can do that. They can only investigate it after you’re dead."

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