'Rich Dad, Poor Dad' author Robert Kiyosaki reveals he's $1B in debt | Hacker News Reader

'Rich Dad, Poor Dad' author Robert Kiyosaki reveals he's $1B in debt

fortune.com

57 pointsandyjohnson086 comments

I thought this was actually going to be an interesting article, about how he over leveraged himself and is now bankrupt, but no.

It's a high profile person who is using debt to build a business. This is basically every business person in the USA, except Kiyosaki hit some magic number at $1bn.

This is completely meaningless without knowing what his assets are worth. Probably more than $1bn.

Yet again, it's proved to me journalism is completely dead.

Just block low tier news. I block verge, ars technica, fortune, etc.

What is high tier news?

As a general rule, if you aren’t paying for it, it’s probably crap. Paid sources are just better-incentivized and better funded to do real reporting.

The traditional newspapers (like WSJ, NYT, WaPo) still do quality reporting. People tend to have strong feelings about them because they disagree with the editorial side (often for good reason), but if you have the media literacy to know what’s news vs. what’s editorial, they are still quality sources.

That's subjective but I like the Economist a lot. NYT is fine. It is what is it but it's a lot better then e.g. CNN.

It’s true that without the full picture $1b in debt means zero.

Exactly. You can't just add up the "debts" or "liabilities" side of the ledger and say, "guy is $1B in debt". You also have to include the assets side of the ledger. If his debts are balanced by assets, then he isn't (net) in debt at all; he's levered.

Granted, leverage can be dangerous -- if the assets evaporate, then you can be in trouble.

But I wonder even about that in this case. Does he personally have $1B in loans? Or does he control companies with $1B in debts? If the latter, then if push comes to shove, those companies can go bankrupt, and he's probably still fine, I imagine.

(Hm. I guess a highly levered company has a very "convex" return profile, like a call option.)

So I agree. If somebody is going to do a story on how Robert Kiyosaki uses debt, they should do this accounting and figure out how much he is personally liable for. And how the assets balance the liabilities.

Not that I'm particularly a fan of the guy, to want to defend him. I've listened to him speak and he says nothing.

As for his assets -- he's talking about physical silver and oil wells? This sounds like cranky goldbug stuff. But what do I know.

I think the guy is one of the biggest intellectual scammers out there.

He wrote his famous book when working a normal 8 hour job and was nowhere near being wealthy. He wasn't a rich dad. Just a normal guy.

His ideas probably can be summed up in a couple of paragraphs and 99% of it is the basic stuff that anyone that doesn't torch their credit card every month does.

Yes rich dad buys a car within his means, poor dad finances the brand new truck and doesn't know what "9% APR" means but he's happy cause he can "afford it" (not).

But since the average financial literacy is very low and several people look for the loudest monkey in the room this guy got successful

This was always my impression every time that former high school classmates-turned-MLM-shysters would hawk his work to me; thank you for confirming it.

>His ideas probably can be summed up in a couple of paragraphs and 99% of it is the basic stuff that anyone that doesn't torch their credit card every month does.

This book was written in the 90s. It was a totally different information landscape. It's easy to look at it now and say the content is obvious.

I read it when I was young, along with school friends who were also burgeoning "masters of the universe" (ie interested in being "rich"). I think it had some great lessons.

That said, the guy obviously turned into a "scammer", thanks in part to the success of his book. He wrote a book with Trump, for crying out loud.

That famous book doesn't claim anything about his wealth, though. It's about his somewhat editorialized childhood/adolescence experience with two adults - his own father and a mentor - and the difference in their behavior and outcomes.

My point is that I find it intellectually dishonest that a person goes on preaching millions of people on stuff he himself never practiced.

The book content was okay albeit much longer than needed.

I think he does and did practice the things from the book. I don't know about anything later than the book, though.

hard to take his points credibly when 1) he wasn't doing that at the time, and 2) he's been broke af for a while now.

I've spent a while pondering his stuff and have come the conclusion that he's not that sammerish although you have to take some of the stuff he says with a pinch of salt.

He didn't claim to be rich when writing the book. It was about his actual dad who didn't make much money and his friends dad who did. I thought maybe he'd made Rich Dad up but he turned out to be a real person and financially successful if a bit of an arsehole. (Interview about that https://youtu.be/CRq6sjpo9iU).

The having a lot of debt thing is actually a smart strategy. If you buy a house for cash and hold it for 20 years your net worth is one house. If you buy 100 with debt and hold for 20 years your net worth is about 50 houses because inflation has worn the debt down. That's how property people get rich.

"Living debt free is the worst advice you could give"

What advice can one give me, an individual who does not wish to live the life of a tape worm?

How does life of a tape worm connect with the idea?

I think the idea is that Kiyosaki's lifestyle is that of a parasite.

Society is built from people producing economic output.

But this guy just buys low, sells high, and uses other people's money to do so?

4 kinds of people.

1. People who love taking advantage of capitalism. 2. People who begrudgingly take advantage of capitalism. 3. People who understand capitalism but pout about it. 4. People too stupid to understand capitalism.

At least 3 orthogonal axes, not 2.

x: understanding capitalism y: success in capitalism z: supporting capitalism

All of these are slightly correlated, but only in rough outline.

I think we need one more axis, willingness to exploit others. Capitalism isn't inherently bad, but it is a problem when it has major flaws that allow for systematic an unintended avenues of exploitation. I support capitalism, I understand capitalism, and I have success in the system however I categorically refuse to partake in the smorgasbord of options for exploiting those who create value to live the life of a parasite. I take pride in my work and get compensated fairly, the work I do requires a lot of expertise and continued learning and development, something not everyone wants to do. My doing so provides significant value and that affords me some nicer things in life, but I do not agree that those who work more mundane jobs shouldn't be compensated such that they can live comfortably. The system only works if everyone who works full-time hours can life a comfortable life. The moment full-time work does not buy you comfort and security, the system rapidly becomes one that survives of the backs of slaves.

> Society is built from people producing economic output.

That's a very idealistic image. People producing economic output are a not that large fraction of society.

There are a lot of people in the society who are useless or harmful from the point of view of economic output. Military, advertising, retirees, children and full-time learners, significant fraction of bureaucrats and political class, successful rent seekers. They are all part of society. I don't have the numbers but I think, altogether they are majority.

Isn't that a cynical view of society?

Doesn't mean it's wrong. Besides, it only sounds bad if you care about economic output and give it a moral value.

It's woefully short sighted, as it misses the long-term prospect of economic output, as most classes of people you mentioned provide some economic benefit in one way or another. Cynicism should be precise, in my opinion.

You can swing to the opposite end of the spectrum and argue that everybody is economically useful indirectly to the point that any meaningful definition of economic utility is gone.

I think emotional opposition to what I wrote comes mainly from the fact that people tend to give moral valuation to economic usefulness. If you are not useful, you are bad. And since they don't want to think about large amount of people as bad, cognitive dissonance arises and forces them to extend the definition of economic utility till they feel comfortable again. Till they narrowed down the amount of bad people to fit their comfortable world view.

I think much healthier way is to say that economic utility and morality are orthogonal and it's perfectly fine that retirees or learners don't have economical utility without any additional justifications. This approach allows making moral judgements more freely and accurately. In this framework, being economically useful can't be used to cover immoral behavior and lack of usefulness can't be used to stigmatize perfectly harmless people or even those useful in other ways.

'Economic output' might be too specific a term for an outsider like me to wield accurately.

Elder care, child care, education, health, etc. are all services that benefit society. I don't mean to complain about people who need those services. The military and politicians have their roles too (though I bristle at 'policital class').

I didn't mention care. Care is beneficial. But saying that the reason for care is economically beneficial gets very close to broken window fallacy.

Society is built on people exploiting those producing economic output, the whole system is based on parasites, cmon at least let’s try to don’t think others are idiots (or be naive) when talking about capitalism

  > But this guy just buys low, sells high, and uses other people's money to do so?

Some people call it capitalism

>and uses other people's money to do so?

Other people who entrust him with their money, and expect a return. It's not like he's stealing it, and I'd argue he's the one doing the most work in that transaction.

He sounds like you should not entrust money to him:

> “If I go bust, the bank goes bust,” he added. “Not my problem.”

I used to think like you, but then I learned about market makers.

If you would need to sell something in a time there aren't many buyers and you needed the money, that kind of people can help you liquidate your asset.

A lot of the times this happens because people make bad investments, but I'm not sure it's his fault.

Dave Ramsey keeps saying that he never buys on 'fair price'. He always buys low/cheap.

Being super patient is also a key attribute for financial success.

Buying low, selling high does produce economic output. It funnels money into causes that generate economic output. If you are able to buy low and sell high you must have some ability to tell the promise of something and if you buy low you are making the promise be more efficient.

There's a vector of progress in some direction and you are deciding the direction by choosing what you are investing in.

And if you are using other people's money you are just increasing the power of the vector in the right direction by more than you could have on your own. So if you have that ability, it's a very wise thing to do.

Money is a tool to organise/decide where the direction should be at and magnify that direction.

Market forces only work when no individual or even large groups of individuals control enough capital to influence market trends, the problem is because of the dismantling of capital gains taxes etc. we have exactly that. We live in a state of affairs where individuals own over 80% of rental properties in entire suburbs. They can then do whatever they like with rent, since there is no such thing as market forces in those areas. They then collude with similar individuals in surrounding areas and create an unregulated monopoly. How do you propose that is beneficial?

Money is a tool that lets us track the goods and services we are throwing on the communal pile. You can trade money you've been given to take things from the pile as needed. The problem is some people get so much money through unintended glitches in the system that they can take so much of the pile that significant portions of the population are left without.

This man, and people like him are tape worms and I want nothing to do with it. I don't want to live a life of struggle or suffering, but I don't want my life of ease to be at someone else's expense.

He's talking about debt to purchase cash flow generating assets, not consumer debt.

> While he recommends leveraging debt to buy assets, he disapproves of taking out a loan to buy materialistic items that won’t increase in value or pay dividends.

> “A lot of people use debt to buy liabilities,” he said. “I drive a Ferrari. Guess what? It’s paid off 100% because it’s a liability. I drive a Rolls-Royce. It’s paid off 100% because it’s a liability.”

There's your answer. And this is actually sound advice. You don't want to accrue interest payments on depreciables. But in the current money printing macro environment, it makes sense to leverage, depending on your time horizon and the prevailing interest rates.

Which means for the average person, where nearly all their purchases are liabilities, telling people to live debt free is good advice and Kiyosaki quotes getting thrown around out of context do more harm than good.

I’m also curious to see how all these debt gluttons using “OPM” are going to fair in an environment of rising interest rates. When the tide goes out we’ll see who was swimming naked. I’m sure we’ll see many people get humbled.

That's right, almost everything you buy is a financial liability.

Debt glutton is a very loaded term. I bought 2 houses in the pandemic but I did so thoughtfully, after much research. My income can fully cover both mortgages and living expenses.

In the US, interest rates are usually locked in and the monthly payment on the mortgage is not affected by the rates of today. Everyone I know who did "the real estate thing" is playing the long game. All of our assets are illiquid for now and that's okay.

There are always reckless people, unlucky people, foolish people. But vilifying debt is not the answer.

The lesson I remember learning from 2008 was that a really, really large part of the population is foolish and reckless. On both sides, not only buyers. What if you’re the exception here instead of the norm?

They you win at capitalism?

By "exception" I interpret that to mean "someone who is capable of financial forethought".

Looking at the statistics around personal finance and debt in the US, a majority are not using debt thoughtfully. I don't know that I'd call them foolish or (willfully) reckless, they were just never taught how to manage money or debt, and are surrounded by messaging that tells them to use it in ways that aren't in their best interest. Unless all of those people decide to take it upon themselves to learn those skills and ignore all that temptation, it is probably best for them to minimize their use of debt, as it is costing them much more than they can hope to gain from the leverage.

I don't think I'd classify someone in your situation as a debt glutton (from the very little I know). I'm more talking about the people who live at the edge of what debt will afford them. The nicest house, cars, clothes, etc that they can get with the least amount of money down while living paycheck to paycheck to keep up with the payments.... or doing something similar with businesses/real estate, where their plan assumes we'll always be in good times and can't weather a storm.

Even when done thoughtfully, there is still risk. It's good that your income can cover the mortgage on both homes and you aren't assuming a tenant is going to reliably pay the rent every month when the mortgage payment is due, but there is the question of the security of that income during a financial downturn. I wish you nothing but the best and do hope the long term play works out for you. I just don't want people to ignore risk in their calculations. The more debt someone has, the more risk they have. The average American has a lot of this type of risk wrapped up in liabilities, not even assets.

As far as being unlucky, some people have been dealt bad hands that will knock anyone down. But preparing in good times can make someone appear more lucky during the bad times. Only time can tell what that looks like. That extra home, if a good tenant is paying rent, could be a big benefit and make you appear very lucky in future bad times. For me, I paid my house off in the good times to reduce my costs if/when bad times come. Different strategies, but hopefully similar results of stability.

Note that he didn't say depreciating asset, he said liability. I've always considered cars a liability and I'm glad to see I'm not alone.

Exactly. I just used the depreciables term in case someone put out an argument stating cars can still be resold for some "asset" value.

His debt doesn't fund consumption, it funds real estate, which he rents or sells for a profit.

He's not advocating to go into debt for a lush Bahamas vacation.

The value of long-term debt to fund real assets is that inflation corrodes the debt value, while boosting the asset value.

Even if the asset doesn't appreciate above the inflation (meaning you do nothing all day), you can still make money if interest is lower than the inflation rate.

>Even if the asset doesn't appreciate above the inflation (meaning you do nothing all day), you can still make money if interest is lower than the inflation rate.

It's a shame that lending institutions also understand this and attempt to set their lending rates accordingly.

They don't care. In the US, reserve requirements are very low. For every dollar of capital, they can lend 10x, 20x more. They literally create money out of thin air.

When a lender pays interest, even if it's below inflation rate, banks still make profit, because they didn't have to put any real assets, so the opportunity cost is zero.

Stupid me. I was using money to buy food the whole time.

Good sarcasm :)

I don't know who you are and how much you make. The first thing I do when I get paid is "pay my future self". Believe it or not, food comes second. The order of business is 1) Invest, 2) Save, 3) Spend. Never the other way around.

I follow a mix of "7 accounts.." (https://www.youtube.com/watch?v=auzLhKvsxnQ), Intelligent Investor (for investments - mostly VOO or VOOG with some SOXX). I perhaps save more than I should (I 'live less').

This is a principle you can do irrespective of the amount (as long as it's over €$1000). I don't mind changing phones every 3 years, and put those $200 to work for me instead of the other way round.

You say every 3 years like that's a long time. Is this more sarcasm?

At their income level, probably changing phones every year would be a common practice.

But their communicational goal here is just to say they consume less than their income would allow in the short term.

Sorry for the delayed response. No, no sarcasm. My current phone is an Oppo, 8+8GB RAM, 256GB storage, and "ok" CPU/GPU.

I've removed the bloatware, using NoRoot Firewall and keep most apps NOT running in background.

The main usage is Signal, Spotify, Netflix, Firefox. I don't need to upgrade it to a faster CPU/GPU/RAM any time soon, so why should I? I got a good case for it, so it survives the falls/drops.

I genuinely don't see a reason to upgrade. Plus, when I DO change a phone I need to spend 2-3-4 days to reinstall apps, copy songs/ringtones/PDFs, remove bloatware, change settings on apps/battery/etc. I don't just boot and run with it.

If you mean you were using debt to buy food and thought it's sustainable, it's an arguably stupid behavior, indeed.

This works until it doesn't, and then you are screwed. Once a single property falls into foreclosure, you lose the refinance option and everything starts collapsing when payments come due you never intended to have to pay.

As in every business, this also has its risks. There are ways to mitigate, but not to eliminate.

But hey, that's life.

I dunno if you rent, but the state of rental markets because of people like this is the definition of parasitic behavior.

He probably doesn't considering that the majority of americans don't rent. US home ownership rate is 66%.

Also you seem to have cause and effect backwards. When people like him buy new homes and put them on the market, rent goes down because there are now more landlords competing on price.

If you owe the bank $100k that's your problem. If you owe the bank $100M that's their problem.

If you owe the hospital $1,000 that's your problem. If you owe the hospital $100,000 that's their problem.

Medical debt is the #1 USA reason to personally declare bankruptcy... USA! USA!! USA!!!

[EDIT]: Despite this comment's unpopularity, this was how I first heard a similar quote, over a decade ago (in Medical School)...

so it remains posted =P

This is a typical saying in many languages. You owe <insert small amount>, it's your problem. You owe <insert insane amount>, it's their problem.

Coz if you get hit by a bus good luck collecting on the debt.. Now, regarding the medical debt.. I remember the day that I found out that in EU i was getting €60k gross, for a job that would pay $130k gross in the US.. so yeah.. eat well, work out, and if in the US you can save an extra $30-50k per year depending on your lifestyle.

Definitely, different approaches to ease of maintaining a "healthy" lifestyle.

I have about five years of my annual salary in investments (no house, yet), plus a healthy "retirement" account, if you can call bitcoins and gamestops "sound."

But I also DO NOT HAVE HEALTH INSURANCE (private contractor, for two+ decades). Nor any dependents (so no life insurance, obviously). I cannot contribute to such a broken system [healthcare] — I'd literally rather die.

For the GDP% spent in US, we really ought to treat ourselves better!

I have a childhood medical condition that has caused me a lifetime of marginal disability. I eat right and work out (as much as possible with the disability and it causes me much pain). I also save lots of money because I assume I'm going to need all of it for medical purposes at some point, and I'll still end up poor. Such is life I suppose, but it is possible to imagine a better system at least.

> Medical debt is the #1 USA reason to personally declare bankruptcy... USA! USA!! USA!!!

Good for them. Health insurance / medical care debt in EU (yes, that definitely exists) can't be handled by declaring bankruptcy, they're going to take practically all your money directly from your bank account until you die homeless.

I personally had this problem, fortunately I work in IT so I got out of it. Ever since then I am helping people in this situation - it's really not unheard of.

EU!!! EU!!! EU!!!

In the US, roughly 80% of medical costs are from chronic illness, and roughly 80% of chronic illness is caused by obesity.

So it stands to reason that ~64% of those medical debt bankruptcies are nobody's fault but their own because they refused to put down the twinkies.

I love how everyone loves to denigrate the health coverage situation in the US but fails to account for how fucking fat and lazy we are. There is no political solution for our unique problems, short of public hangings of food industry executives and mandatory rationing, both of which are anathema to the American Zeitgeist. Single-payer healthcare would only make the problem worse, as it would increase the moral hazard to stuffing our faces.

>Medical debt is the #1 USA reason to personally declare bankruptcy... USA! USA!! USA!!!

No. Only 4% of US bankruptcies are because of medical bills. <https://www.washingtonpost.com/blogs/post-partisan/wp/2018/0...>. A tipoff that insert large percentage here of bankruptcies aren't actually because of medical costs is that only 6% of bankruptcies by those without health insurance are because of that cause. The biggest cause of bankruptcies is lack of income, which health insurance doesn't affect.

Kiyosaki has always given bad advice, "Rich Author, Poor Readers":

* https://awealthofcommonsense.com/2023/12/rich-author-poor-re...

I think he is right. This is basically modern portfolio theory. You should hold an optimal mix of assets, but you can hold negative quantities.

If money is a bad way of keeping value (bad banks! Inflation! Money printing!....) then holding a negative amount (debt) and putting it into other parts of your portfolio is a good idea.

A really a basic idea, with a solid mathematical foundation. I can highly recommend the first week of financial markets on coursera if you want to see a not so controversial introduction to this concept.

The only problem is that it adds risk (swings could become larger than your net worth, which can mean bankruptcy)

Does he actually produce anything of value, or just arbitrage various financial trends, eg cheap debt paired with steep asset price rises, especially property?

To me, how you get it, and how you spend it, are essential in judging the worth of wealth.

eg, how does he spend what he 'earns'?

How is this guy wrong in hedging against the declining dollar and rising price of commodities? At a time when all central banks are de-dollarizing and buying gold, wouldn't this be the perfect hedge?

I know for a fact that most fund managers (at least in India) have been converting as much as 10-20% of their portfolios into gold and other commodities.

He is in debt, in US dollars, to buy cash flow generating real assets like rental property. He is effectively shorting the US dollar, inflation corrodes the debt value and at the same time boosting the asset value.

Right. It's good debt. It's the type of debt rich people do to get richer. He's got assest that more than likely appreciate greater than the interest on the debt. It's not like he's run up $1B in high interest credit card debt buying needless shite at TJ Maxx.

This is one of the key differences between rich and poor. Rich use debt to their advantage. Poor use debt to stay poor, lose ground.

US dollar debt overall is still selling, assuming that it all comes through treasury securities [0]. That is still a reasonable uptrend on the Grand Total line. Although China appears to be nope-ing out.

It is entering an interesting phase because it isn't immediately clear from the stats who is on the other side of the tax havens like Luxembourg, Ireland and the Caymans. Brave people, without a doubt. I'm cynically assuming retirement funds but not really putting any weight behind that wild stab.

[0] https://ticdata.treasury.gov/resource-center/data-chart-cent...

>How is this guy wrong in hedging against the declining dollar and rising price of commodities? At a time when all central banks are de-dollarizing and buying gold, wouldn't this be the perfect hedge?

How could he be wrong about a strategy that bankrupted him? What does the market tell you? I see the DXY on an upward path for 20 years.

De-dollarization is overblown.

>I know for a fact that most fund managers (at least in India) have been converting as much as 10-20% of their portfolios into gold and other commodities.

10-20% of a basket of various commodities is a pretty standard allocation, if a bit high. It's certainly not some major defensive hedge.

Markets can stay irrational longer than you can stay solvent, as the saying goes.

With regard to India is that an unusual position because Indian fund managers can use gold to purchase oil cheaply from Russia? Other fund managers won't have to option to purchase commodity oil below market rate.

Same with China. 20% discount on oil + markups on essentials. on an economy-wide scale this is pretty sweet, and will continue as long as Russia stays at war.

I think India is weary of Russia, but these are deals they can't say no to.

> How is this guy wrong in hedging against the declining dollar and rising price of commodities?

This guy has a track record for being wrong:

* https://awealthofcommonsense.com/2023/12/rich-author-poor-re...

No normal person should be doing any kind of hedging. If you want to save 'successfully' (e.g., for retirement) follow Buffett's advice and just buy index funds on a monthly basis (DCA) with a company match (in a 401(k) for US readers).

Can you give some examples? what category of funds I am not aware of any gold portfolio in traditional equity and debt mutual funds in India

on no these are like fund houses, HNI family fund house clusters etc. The news is more than a year old BTW. (I was trying to sell an asset management SAAS to these).

My sister tried to get me to read this book, around the same time she lost a bunch of money to a pyramid scheme.

A couple of high school classmates sucked into the morass of MLMs were the only ones who ever pimped this book to me unironically.

Rich Dad Poor Dad is a good book for beginners.

It introduces a lot of concepts, views and rules that most people have never encountered before. And packages this into a story which makes it easy to understand.

Judging from the comments in this thread nobody have either read the book or knows very little about investing/finance in general but of course they have strong opinions.

Nothing wrong with the book at all, and honestly I dont understand this endless bashing of the author.

Just checked Amazon it has a 4.7 star average with 94,163 ratings for a book that was self published in 1997.

Pretty Good I would say.

"He who dies with debts has made a profit"

Rich Dad Poor Dad is a lying, POS, grifter. https://johntreed.com/blogs/john-t-reed-s-real-estate-invest...

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