Unfair Advantage Book Review by Robert Kiyosaki

As a member of Rich Dad World, I downloaded the online version of this book for a limited time offer only. This book offers many important financial lessons that will make you realize the importance of being in the B and I quadrants, which I would like to summarize below.

The school system teaches students to be employees and does not prepare them to make sound financial decisions. Financial education in schools teaches children to send money to the government and to banks. These children grow up and do not know the difference between a good and a bad investment; good and bad advice. True financial education allows you to tell the difference and get people to send you money. Many of the top ten billionaires on the Forbes list do not have a formal education such as having a degree. They knew that school is not the place for them to be who they are today.

In the US, taxes are the biggest expense for people in the E and S quadrants. Getting the right tax advice from the right person is key. The right tax advisor should be able to help you reduce her taxes. With the money saved, it could be channeled into other investments to build your assets to generate income. There are three types of income you pay taxes on:

• Ordinary Income – This attracts the highest tax rate, meaning the more you work for money as an employee or self-employed, the more tax you pay.

• Portfolio income (also known as capital gains): This attracts the second highest tax rate, meaning the more your money works for you, the less tax you pay.

• Passive income – this attracts the lowest or zero tax rate, meaning other people’s money works harder for you; you pay less or even no tax.

I agree with Robert that savers are losers now as banks give lower interest to save money in bank account. Since President Nixon removed the US currency from the gold standard, money ceased to be money and became debt. Countries are quick to devalue their money by printing large amounts to help increase their exports to other countries. This rise in inflation thereby lowers their purchasing power, meaning groceries have become more and more expensive. So if you can use debt to buy assets and put money in your pocket, that’s really an unfair advantage. Many people have become poorer because they used debt to buy liabilities that take money out of their pocket, worst of all they think that the liability is an asset.

Robert explains why the next couple of words are oxymorons to those without financial education. An oxymoron is words that contradict each other. They are 1) Job Security 2) Saving Money 3) Safe Investments 4) Fair Share 5) Mutual Fund 6) Diversified Portfolio 7) Debt Free. Risk is inversely related to control. If you have less control, it means that the risk increases in your investment. Rich Dad advised Robert to learn three things if he wanted to be rich like Rich Dad in the B and I quadrants. The three things to learn are:

• Sale (income control).

• Real estate investment (debt control).

• Technical investments (control markets).

All fund managers advise people to diversify into a portfolio of stocks, bonds, and mutual funds. For those without a solid financial education, you will think this is sound advice. However, the fund manager is still putting his money into an asset class that are paper assets. The four basic asset classes Robert invests in are 1) Businesses 2) Real Estate 3) Paper Assets 4) Commodities. The more he learns and knows about these asset classes, the more control he will have and his risk will be reduced.

Different kinds of people focus on different places on the income statement and balance sheet. The poor focus on expenses. The middle class focuses on the passive. The rich focus on assets. The rich don’t work for money, they make their money work hard for them. The application of the three laws of compensation will allow a person to enjoy an infinite return on investment, leading to enormous wealth.

I agree with Robert that we need two kinds of schools. One suitable for those who want to be in the E and S quadrant and the other for the B and I quadrant. In Singapore, some efforts are made to encourage entrepreneurship; some courses related to it have been established as “Escuela de Emprendedores”. However, this is not in the core curriculum leading to the degree program. So I doubt that what Robert proposed won’t be seen here for a long time until the US has a breakthrough in its education system.