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SS 54 – Rich Dad Scams By Robert Kiyosaki

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Episode: 54

Guest: Robert Kiyosaki

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Robert Kiyosaki is the author of the famous book Rich Dad, Poor Dad. His book has been referenced countless of times from financial experts all over the world. Robert has appeared on shows such as Bloomberg News, CNN, Oprah, and Larry King Live. He has been on Jason’s show twice and today he talks about the biggest scams in our modern society.

Key Takeaways:
2:15 – The real scam is when you don’t know anything about money.
8:10 – The biggest scam is when you invest in the stock market. The brokers are the ones who are always making money.
11:52 – What’s really happening in the stock market is the CEOs are buying their own stock and drying the market up to try and dube you that the market is doing well and to invest.
18:26 – Robert talks about his investments and his debt.
20:25 – Being successful in school doesn’t make you rich.
24:50 – The biggest scam is the lack of financial education in the school system.

 

Tweetables:
“I began to realize the biggest scam of all is education.”

“The key to life is other people’s money.”

“Being successful in school doesn’t make you rich.”

 

Mentioned In This Episode:
http://www.richdad.com/

 

Transcript

Jason Hartman:
It’s my pleasure to welcome Robert Kiyosaki back to the show. Of course you know his name. He’s an international bestseller and he wrote the number one personal finance book of all time, which you’ve probably read. It’s Rich Dad, Poor Dad. We’re going to talk about his latest work, which is entitled Rich Dad Scams: 8 Financial Scams Disguised As Wisdom. This is very timely for today’s world and Robert, welcome back, good to talk to ya.

Robert Kiyosaki:
Thank you very much.

Jason:
Well, it’s good to have you on the show. So, tell us about some of these things that people should really be aware of and concerned about out there in the world. You know, there’s snake oil salesmen everywhere. That was hundreds of years ago, it’s true today.

Robert:
My question has always been, you know, why don’t we have financial education in schools? So, in my opinion, this financial crisis we’re in today and it’s a serious crisis really starts in the classroom. You know, when I was a little a boy about 9 years old, I kept asking my teachers when are we going to learn about money and the teacher finally told me the truth, we don’t teach about money in school.

So, at 9 years old, I better find out somebody who can teach me about money and that’s when I met my rich dad, which was my best friend’s father and then I began to realize the biggest scam of all is education. They only train you as employees to work for the rich and as long as you know nothing about money, they can control your life. So, that’s where the scam starts.

Jason:
Yeah, it sure does. You know, that whole system was designed by the industrialist hundred plus years ago to create employees. It’s kind of like a factory. They were just educating, if you will, employees. As you talked about in depth in some of your work over the years to just work for them and not to think, not to be entrepreneurs, not to be successful investors. Why hasn’t that changed? I mean, are the powers that be, the National Education Association, as Steve Forbes calls it the National Extortion Association, so powerful that we just can’t make a dent in the system?

Robert:
That’s part of it. You were talking about a hundred years ago, the exact date was 1904. A gentleman named John D. Rockefeller founded the Standard Oil Company basically heisted the educational system by creating the General Education Board in 1904, so 110 years ago. What the General Education system did that Rockefeller controlled was he then dictated the content or the curriculum of schools. So, as you know, to be successful today in the real world you need academy education, you need professional education, and you need financial education.

The reason why most people are highly educated smart people like my poor dad is they don’t have any financial education and they think they’re smart. As long as you come out of school with a false sense of I’m smart, you’re not, then it’s really tough to learn from a I’m smart, I’m great, and you’re an idiot point of view. So, what we have today when you look at politics you have a bunch of highly educated, smart people who really don’t know much about money as for the president on down. That’s our problem.

Jason:
I certainly agree with you there Robert. What can we do to overcome this? I mean, reading Rich Dad, Poor Dad is a great start. That’s inspired millions of people, of course, to take a deeper dive. Where should people really focus their effort when you talk about financial education? Do you include entrepreneurship in that by the way?

Robert:
Well, it’s not about so much about entrepreneurship is you have to know assets from liabilities. The richest people on earth never went to school. They’re called Steve Jobs, Bill Gates, The Beatles, Oprah Winfrey, and what they did was they created mega brands and mega businesses. The same as Google, you know, Facebook, and all this. Walt Disney never finished school. So what they did, they were great entrepreneurs, but you don’t have to be that big of an entrepreneur.

I have a friend who is my age and he started when he was highschool with I think 12 chickens. He just started taking the eggs of his chickens and re-investing his eggs and today his chicken factory out of Ohio produced 10 million eggs a day, so you figure he’s making 10 cents a egg on everyone he makes, that’s a lot of cash flow, you know. He off-sells the fertilizer that the chicken made and all of this and the guy never went to school. He’s a chicken farmer.

Colonel Sanders all he had to sell was a chicken recipe. *Laughter*. J.K Rowling was on welfare wrote Harry Potter. So, a lot of it is understanding the world of business and you don’t have to be an entrepreneur to tap into it. So, J.K Rowling is hardly an entrepreneur and she just tapped in.

Jason:
Good point. You know, I’d like to talk to you about some sort of related issues if we could. Yesterday I posted on my Facebook mentioning I was going to have you back on the show today and I had a few questions that people brought up and one of them is the seemingly very exciting area of crowd funding. I have a feeling would have something to say about that, especially as it may be funding real estate deal.

Robert:
Well, crowd funding to me is a scam also. It’s not the way I’d do it, but there’s laws that state small people will not get hurt, but as you know a lot of con-men who are going to float dubious deals and people will send money in like they did to Bernie Madoff and some guy is going to get burned. There’s going to be a big hullabaloo about it and then they’re going to try and shut it down. They can see it coming without really thinking much about it.

Jason:
I agree.

Robert:
Sort of like Bitcoin. I try and get my head around it, but I’m going, well, if that’s really some ways you’re going to get burned, so every time you have people just kind of rushing into something, then you better step back a little bit and pay attention.

Jason:
And think. You know, as an alternative to Wall Street, I mean, we know Wall Street is a scam in so many ways even though it’s legalize through lobbyist and PR firms and lawyers and accountants. It just seems like there’s going to be a lot of opportunity for the little guy to get a deal off the ground nowadays. Of course there will be scam artists, we know that’s coming. There will be tons of litigation, but we already have that. We have scandals-galore on Wall Street even after all the so-called corporate government reforms.

Robert:
Yeah, so, what’s your question?

Jason:
Well, I don’t know. *Laughter*. I guess you answered it. So thank you for that.

Robert:
I think the question is what you’re going to do about and I’ve never changed my tune. I’ve always said you have to have financial education, but the biggest scam of all is what Wall Street passes off in the education system as financial education. For example, what Wall Street and the financial planners and the stock brokers and the school teachers say is financial education is save money, invest for the long term in a well diversified portfolio, stocks, balance, and mutual fund, and you’ll be rich.

Well, that’s how they rip you off, because what the way you get ripped off in the stock market is, as you know, the stock market always goes up because they pump up it with quantitative using right now. So, all the amateurs come running in because they see the stock market at all time highs and then the bottom is going to fall out and then the amateurs are going to get ripped off by the professionals and that happens all the time.

Jason:
It happens every time, you know, it’s always the amateurs when the news is so positive and everybody’s, you know, the adrenaline junkies and the always playing musical chairs and the music stops and all the big guys have already pulled out, haven’t they?

Robert:
Well, that’s the game. You’re probably too young to remember this, but in the comic strip Peanuts, you know like Charlie Brown and Lucy, Lucy would always hold the football and Charlie Brown says you’re going to pull it out aren’t you? She goes, no, no, kick the football, and every time Charlie Brown runs up the football and Lucy pulls up the football and Charlie Brown falls down. It happens every single time and people don’t learn.

Jason:
Yeah, it’s amazing how short people’s memories are, aren’t they?

Robert:
Well, if you look at what’s going on in Iraq, I mean, somebody said, “Oh my god, this is just like Vietnam.” I said, “It’s always been that way.” We’re not there to fight for peace, we’re there to fight for the military industrial complex because it’s very profitable to explode bombs in the desert and it’s very profitable to have people killed. Oh, we’re there to save the Iraqis. That’s BS.

We’re there fighting for the military industrial complex and the moment we recognize that..You know, I’m former marine, I’ve fought in Vietnam twice. One day I woke up and I said this is not about world peace, this is about money, and that’s why I don’t regret going to Vietnam, but i kind of woke up. I see the same thing going on in Iraq today. It’s a war we could never win.

Jason:
So Robert, as we’ve got a little time left, I’d like to ask you, you’ve made some predictions in the past that have been amazingly accurate. What do you think is coming next for us? I mean, are we going to see a lot of inflation, will we see deflation? It seems like with all the money printing we ultimately have gotta see inflation, but I don’t know, there are those who think both ways.

Robert:
Yeah, that’s the truth. You don’t really know which way it’s going to go, but obviously the government wants inflation, because you can fight inflation, you can’t fight deflation. So, when prices start to go down they accelerate down. Let me give an example, if you knew today..you’re going to buy a new KIA and it was $10,000 bucks, but you knew tomorrow it’ll be $8,000, you wouldn’t spend $10,000. If you it was going to go from 8 to 6, you’d wait again. So, that’s when the bottom drops out because people are waiting for it to crash anyways. That’s deflation.

So, the Fed is obviously trying for inflation and the only thing they’re inflating is the stock market and they’re trying inflate the housing market and, as I said, we don’t learn from our mistakes. We didn’t learn from Iraq, we didn’t learn from Vietnam, and we didn’t learn from the last crash, so they’re doing the exact the same thing. The stock market isn’t really up. What is happening is that the CEOs are basically repurchasing their own stock so it gives the illusion the price is going up, but they’re just drying up the supply of stock and eventually the amateurs and it’s going to be a Wile E. Coyote moment and go, beep, beep, and you’ll fall off the cliff.

Jason:
*Laughter*. That is true and I remember when the DOW went above 15,000 and of course CNBC was going crazy and everybody was talking it up and all you do is compare the real dollar return and really until the DOW got to, and of course the SNPs are a more accurate gauge because it’s much broader, but just looking at the DOW since it’s quoted the most, it had to be 15,800 to be in, real dollars, exactly where you wear about 11 years earlier and they’re talking about record highs and most people they’re just don’t even realize it. They don’t even get it. It’s like trickery with numbers.

Robert:
That’s correct and they can lie with words. For example, when the crash hit in 2007-2008, all these big companies came on and said, “Yep, we beat the SNP.” What they didn’t tell you is the SNP went down by 57% and they only went down by 50%. *Laughter*.

Jason:
*Laughter*.

Robert:
Somebody says you can’t cure stupid.

Jason:
That’s for sure.

Robert:
We’re making the same mistakes again and again and again and the average person will never learn, so shame on them.

Jason:
You’re absolutely right.

Robert:
If you understand as a good thing, I made more between 2007 and 2014 than I did in all the years of my life prior to that, but I was prepared for it, I had experience, I had an education, I had my partners, I had my teams, so when the crash came, I felt like we went to heaven.

Jason:
You were ready to seize upon opportunities when most people either weren’t or they were just scared, because they didn’t know any better so they were just full of fear. They were just allowing the media to program their minds.

Robert:
Worst of all they don’t have the skill set to take advantage of the crash, if you know what I mean. So, they may be a PhD in microbiology, very smart people, but they know nothing about crashes. So, I’m afraid the next crash may be a long one. You know, in 1929, the DOW went down from a high of 381 and it took 25 years for it to hit 381 again, so it went down in 1929 and it didn’t hit 381 until 1954. So, the next one may stay down for a long time because there will be redemption after redemption, which means old guys like me will be crashing in their stocks because they don’t have time. They cash now.

Jason:
Yeah, very good point, very good point. I think probably what really, you know, rescued the stock market, if you will, way back then was the fact that Merrill brought so many people from the general public into the stock market. They started promoting the stock market so much more widely when the average John Q Public started bringing their savings into the market. That probably helped quite a bit too.

Robert:
They took Wall Street to Main Street. Merrill did do that. The worst thing between 1929 and today was that 1929 only a few people were in the stock market and today what you’re bringing up is that most people in one way or the other in the funds or retirements are in the stock market.

If you look at the DOW today, it’s in a triple top. A triple top is a possibly the most ominous, you know, it’s like the, it’s almost like the shot a double funnel tornado is to the, well, a triple top is like a triple tornado hitting. So, that’s why I look at all that stuff.

I listen to CNBC and I feel for every person my age is going, “What should I do, what should I do? I dump my money into the stock market and I’m receiving nothing in interest in my savings. I don’t know where to put my money,” Well, those are all symptoms who may be highly educated, but lacks any financial education. It’s really good time coming up, but unfortunately millions of people are wiped out.

Jason:
Yes, you’re definitely right about that. It’s going to be painful for a lot of people What are you doing with your real estate portfolio nowadays? By the way I wanna tell you something I just discovered about two weeks ago, I was reading your Wikipedia entry and someone put in there that you were on my show, *Laughter*, in 2011 and it said you owned 14,000 apartment houses, I’m sure that was units, they sort of misquoted you probably. Talked about investing in warehouses, purple net leases, and I know you talked about oil wells too back then, and just kind of wanna see where you were on real estate. We talked a lot about stocks.

Robert:
Well, first of all, I wouldn’t believe anything I read on the web anyway.

Jason:
Well, yeah, fair enough.

Robert:
I don’t know how people believe that stuff. I mean, I’m an old guy so I sit there and watch it and I go, “You can say anything you like, why would you believe anything?” The other thing too is it’s not 14,000. It’s 4,000.

Jason:
Hmm, that’s interesting.

Robert:
What I’m doing with real estate is I have about 500 million dollars in debt and right now the average floating debt is about 5% and a company just came by and said we’ll refinance it all for less than 3%, You don’t have to be a rocket scientist to know that if you take 5 million at 5% and you drop it to 3%, that’s 2 million dollars in extra cash flow through the reduction of mortgage payments. So, that’s why debt makes people rich and yet they listen to all these so-called financial experts saying get out of debt. That’s really bad advice, you should be getting into debt.

Jason:
Oh, I completely agree. Unbelievable. You know, what are your thoughts on the real rate of inflation, of course we got the official numbers, but if you’re getting your debt at 3%, I would argue you have a negative real interest rate there.

Robert:
Yeah I do. Well, it depends on how you compute CPA, Consumer Price Index, because in 1972, I think, was Nixon changed valuations for the CPA Consumer Price Index. He took out food and fuel from inflation, so that’s how Obama can get up so we have no inflation, but if you go shopping you’ll see inflation all over the place and, you know, when Obama took office, gasoline per gallon was about a $1.80 a gallon and today it’s about $3.50 per. So, that’s a 100% increase in so many years, but yet Obama can say there’s no inflation. That’s what I’m saying, Facebook or the web, I don’t know how you can believe anything today.

Jason:
Right, right. You really have to read between the lines and people have got to think. They’ve got to have an education. They’ve got to think for themselves. You know, know how to dissect this stuff and to understand it. Buy a mutual fund rather than accumulate some good long term fixed rate debt against real estate, especially Robert, when as real estate investors, we don’t even pay our own debt, our tenants pay our debt for us, right?

Robert:
The key to life is other people’s money, so you burrow the bank’s money and your tenant pays back the bank.

Jason:
What a deal. All you need to do is get into the middle of that deal and you can get fabulously rich.

Robert:
Imagine that. I mean, the bank will give you the money to buy something that makes you rich and the tenant will pay to live there and pay off the bank. On top of that, you get appreciation, deprecation, amortization, all these tax breaks, then you hear everybody complaining about raising taxes, but if you get into real estate with debt, you don’t pay any taxes. So, you know, that’s what this book, I guess, is about. 8 financial scams disguised as wisdom, you can get it a RichDad.com, but it starts with school, you know. Being successful in school doesn’t make you rich.

Jason:
Yeah, that’s for sure.

Robert:
I kind of look at these student loans. I feel for the young people leaving school with all this $20-30,000 in student loan debt. That’s hard to pay back.

Jason:
It sure is, especially when there aren’t jobs out there waiting for them and the fact that debt is only type of debt not discharge-able in bankruptcy, so they literally created a generation of indentured servants that don’t get a second change, you know.

Robert:
It’s even worse than that, I mean, what you’re saying is accurate, but it’s the worst possible type of debt. You know, if I screw up on an apartment house, I can just bankrupt it and I’m free and clear from the debt, but I can’t bankrupt a student loan debt on top of that I haven’t learned anything about money on top of it, so what did I spend that money for? See, it goes back to what I was saying when I was 9 years old raising my hand and saying, “When are we going to learn about money?” and the answer was never, so why am I going to school then? You know, that was my question. Look at the riches people on earth that didn’t finish school, Steve Jobs, Bill Gates, Michael Dell, Zuckerberg, Walt Disney, Henry Ford, Oprah Winfrey, just to name a few.

Jason:
Yep, don’t forget Jason Hartman in there, *Laughter*, because I just felt like when I was in college I was listening to a government bureaucrat, essentially, teach me about something that I’m just never going to use. I was anxious to get out there in the real world and buy properties. I bought my first rental property at 20 years old and, you know, it’s been on there. Successful people are do-ers, they learn, of course, you gotta balance learning and doing, but they get the kind of education that is real world education, financial education.

Robert:
In 1973 I returned from Vietnam, I was pilot for the Marine Corp and poor dad obviously wanted me to get my MBA and rich dad said it was a waste of time, but anyway, he suggested I take a real estate course. I took a three day real estate course as well as sign up for my MBA and I learned more in three days in the real estate course than I did at my MBA program, so finally after falling asleep every night of the week at the MBA program, I just dropped out and got rich buying real estate.

Jason:
It’s true.

Robert:
I spent less time and made more money, because it cost me three days and $385 dollars, which was a lot of money back in 73 and I became a multi-millionaire over and over and over again for that $385 dollars and I paid zero taxes legal. What’s better than that?

Jason:
Hey Robert, I want to take a guess, was that like William Nickerson’s course or something way back then?

Robert:
It was, yeah, that course, yeah.

Jason:
That’s fantastic. That’s the old days of real estate investing and real estate guru’s out there. Well, your website is RichDad.com, of course, people can get this book, it’s a download right from the web. You know, I found it really fascinating how you did conspiracy of the rich, which was fantastic by the way. I really enjoyed that one. How it was kind of that collaborative effort. Did you do that with this new book?

Robert:
This new book is, to be truthful, these are books I wrote a long time ago, but what I said a long time ago is coming true. So, the 8 financial scams, it’s really hard to believe financial scam is going to school. A job is a worst thing you can get because you’re paying more in taxes. Harder you work, the higher tax.

Why would you save money, everybody says you gotta save money, why would you save money when I can burrow money at 3.8% and then why would I invest for the long term in the stock market if I’m only going to get ripped off when the market crashes and why would I buy a house when your house is not an asset. So, really, that’s a scam. A scam has to do with what so-called the rich have perpetrated upon us without financial education.

So what a scam is, what we think is smart, is actually stupid. So, that’s really what the 8 scams are. Guys, if you really wanna find out how big a scam that information is, that’s why you should get the book, maybe you’ll stop thinking that way. Maybe you won’t be looking for a job, maybe you won’t be going back to school, maybe you won’t be thinking of houses as an asset, maybe you’ll think, “Maybe I should get rich instead of work for somebody else.” That’s the purpose of my work.

I’m not saying what you should do, but I would think think of it and the biggest scam is the lack of financial education in our school system. Like I said, it started in 1904 with a man named John D. Rockefeller and the General Education Board. If you read the bi-laws of the General Education Board, the purpose of the General Education Board was to take foreign kids and turn them into employees in factories, that was the mission and nothing has changed. So, if you’re going to school to get a job, you’re being suckered. That’s the worst part about it.

Jason:
Absolutely.

Robert:
I’m not saying education is unimportant, I’m saying it may be obsolete.

Jason:
The worst this is to see people get these useless liberal arts degrees. At least if you’re going to go to school, be an engineer or do something that’s real, you know? *Laughter*. I can’t tell you, Robert, how many people over the years I’ve hired who have degrees in psychology, you know, that they’re not using. It’s just unbelievable. Good advice. Well, very sage advice again from Robert Kiyosaki. It’s a pleasure to have you back on the show. His website is RichDad.com. Go and download this book. I think you’ll really enjoy it and Robert, again, thanks for joining us.

Robert:
Thank you for the time.