Economist Writing Every Day

With my interest in personal finance, the headline

Robert Kiyosaki, ‘Rich Dad Poor Dad’ Author, Says, ‘I Am a Billionaire in Debt’ — And Calls Dave Ramsey An Idiot For Encouraging People To Live Debt-Free

got my attention. I happen to know many people who have been helped by Dave Ramsey‘s sensible courses and books on managing personal finances. But I don’t know a single person who has gotten rich by following Kiyosaki’s advice. So, I decided to do a little fact checking here.

Richard Kiyosaki published his financial self-help book Rich Dad Poor Dad in 1997. The book purports to be non-fiction, and dispenses financial advice through a supposed autobiographical narrative which contrasts his well-educated, hard-working but not-rich father (“poor dad”) with the father of his next-door neighbor Mike. Mike’s father (“rich dad”) was an eight-grade dropout who owned “convenient stores, restaurants, and a construction company. “

According to the narrative, Kiyosaki learned financial business secrets from this rich dad, which Kiyosaki applied to quickly build a vast real estate empire, using the magic of borrowed money.
Rich Dad Poor Dad became a runaway success, selling over 32 million copies, and remaining on the New York Times best seller list for over six years. Kiyosaki has parlayed its success into a series of further books and related products. Kiyosaki’s narrative has fired the imaginations of millions, and made him rich through the sales of his books and other products.

I read his book back around 2000, and came away with mixed impressions. On the one hand, there was sensible advice to put your resources into money-generating assets rather than frittering it away on consumer goods. The narrative of how easy it is to make big money in rental real estate was alluring, and motivated me to delve further into the subject. On the other hand, the book was pretty short on specifics of how to actually do this, beyond recommending expensive courses offered by Mr. Kiyosaki. It seemed too good to be true, but hey, how could I argue with such apparent success?

It turns out that that skeptical intuition of mine was justified: the promises offered in Rich Dad Poor Dad are too good to be true, and in fact the whole narrative of the book appears to have been made up in order to appeal to gullible readers.

Various people have probed into the Kiyosaki story. The most extensive treatment I know of is “John T. Reed’s analysis of Robert T. Kiyosaki’s book Rich Dad, Poor Dad”, but see also “ Shocking Revelation: Kiyosaki’s “Rich Dad” Is Not Real, but a Myth Like Harry Potter “, by KSCHANG at Tough Nickel, and others.

As best anybody can tell, there never was this “rich dad” character as described by Kiyosaki. Also, there’s no evidence that Kiyosaki actually made significant money by real estate dealings, prior to making millions of dollars with his book sales (and presumably putting some of that into real estate.)

As a person who values personal integrity, I tend to be peeved when authors or screenwriters present a book or a movie as fact, when key parts of it are actually fictional.  The usual “Based on a true story“ disclaimer doesn’t cut it, since readers/viewers can’t help coming away with the impression that this is what happened, when really it didn’t (Think: Roots, A Beautiful Mind, etc., etc.).

So the dishonesty at the core of Rich Dad Poor Dad annoys me. What is more significant is that much of the advice is actually counterproductive, harmful, or even illegal. For instance, Kiyosaki recommends trading stocks based on private tips from friends in corporations; this is called “insider trading”, and people like Martha Stewart have gone to jail in connection with it. He also tells of how he can back out of contracts by inserting a clause “subject to the approval of my partner”, where said partner was actually his cat. That is called “fraud”.

Richard Emert at The Motley Fool opines, “Kiyosaki’s material is almost completely devoid of specific financial advice. Further, his material on making money in real estate appears to be little more than repackaged hype from the “no money down” real estate hucksters of the late ’80s.”
In deference to his exhaustive investigation, I’ll give John Reed the last words here (tell us how you really feel, John):

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.

Kiyosaki is a salesman and a motivational speaker. He has no financial expertise and won’t disclose his supposed real estate or other investment success.

Rich Dad, Poor Dad contains much wrong advice, much bad advice, some dangerous advice, and virtually no good advice.

[emphases in the original]

…the book goes on to deliver a pack of lies that make getting rich seem much easier than it really is and make education sound much less valuable than it really is. Basically, people want to get rich quick without effort or risk. Kiyosaki is just the latest in a long line of con men who pander to that fantasy.

… [But] to members of Kiyosaki’s cult, it matters not how many false or probably-false statements I find in Kiyosaki’s writings. They just like the guy. Personality is an appropriate criterion for selecting someone to hang around with. But it is a highly inappropriate criterion for evaluating Kiyosaki’s advice, because he’s not going to let you hang around with him and your family’s finances are serious business.