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Notes & Summaries 

I love how Nat Eliason and Ali Abdaal publish their book notes. This page is where I summarize the important things I learned from the various books and media I consumed. I hope you find it useful :)

Rich Dad, Poor Dad By Robert T. Kiyosaki

6/4/2021

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Type: Non-Fiction 
Genres: Business, Life Advice, Self-Help
Rating: 3/5 ​

The Book in 3 Sentences

  1. Robert grew up with a poor dad (his biological dad) and a rich dad (his best friend's dad).
    1. The biological dad (poor dad) was a Stanford PhD graduate who was financially illiterate and followed the traditional 9-5 path.
    2. The friend's dad (rich dad) was a high school drop out who later built a multi-million dollar business empire and employed thousands of people.
  2. Work for a salary, but find a way to become financially independent and have your money work for you.
  3. Learn financial intelligence above all else.
    1. Robert's biggest point is to know the difference between an asset and a liability.
      1. Real assets don't require active management (Ex; stocks, bonds, securities, income-generating real estate and intellectual properties.)
      2. Liabilities make you loose money or incur large expenses.

Impressions

  • The book was entertaining to read, but felt kind of preachy.
  • The author is rich, but wasn't really someone who was inspiring or a noble hero.
    • This isn't a bad thing. I'm just someone who tends to like rich people who actually contributed science or inventions that made the world a better place.
  • The book provided very basic overviews of how to think about money, but didn't really provide any real financial knowledge.
    • I think it's great book for beginners and traditional thinkers who are first entering the world of money. It isn't so great for those with a high financial literacy.

How I Discovered It ​

I was looking for a book to read regarding money and how to get rich, and ended up finding this book on various financial blogs. The premise of having a rich dad and a poor dad was also really intriguing to me. I also found that the book was praised as one of the first books you should read when first diving into the world of financial intelligence.

Who Should Read It? ​

  • Those interested in learning about the rich.
  • Anyone looking for an interesting story.
  • A traditional thinker who wants to learn about financial independence and wealth.
  • Someone who is open minded and doesn't want to live the traditional 9-5 life and is looking for guidance.

How the Book Changed Me ​

  • The book inspired me to open a wealth simple account and invest my money.
  • The book inspired me to create a budget and learn to save.
  • Money and income is often seen as a taboo topic to openly discuss. This book made me feel more comfortable when it came to discussing money and my finances with others.
  • It made me realize that I want financial independence and a rich comfortable life that allows me to not have to worry about money.
  • This book inspired me to not work for a summer and just learn about all the things I wanted to learn like chemistry, calculus, and chemistry.

My Top 3 Quotes

  • "You'd best change your point of view. Stop blaming me, thinking I'm the problem. If you think I'm the problem, then you have to change me. If you realize that you're the problem, then you can change yourself, learn something and grow wiser. Most people want everyone else in the world to change but themselves. Let me tell you, it's easier to change yourself than everyone else.”
  • "I often meet people who are too busy to take care of their wealth. And there are people too busy to take care of their health. The cause is the same. They're busy, and they stay busy as a way of avoiding something they do not want to face. Nobody has to tell them. Deep down they know. In fact, if you remind them, they often respond with anger or irritation."
  • "Whenever you feel “short” or in “need” of something, give what you want first and it will come back in buckets. That is true for money, a smile, love, friendship."

Summary+Notes

Introduction: Rich Dad and Poor Dad
  • Robert had two dads:
    • Poor dad was Robert's biological dad, who had a PhD from Stanford. Poor dad had the American white picket fence mindset. He believed in working hard, getting a stable job, and working till you could eventually retire.
    • Rich dad was Robert's friend Mike's dad. Rich dad was a high school dropout who built a local multi-million dollar business.
    • Robert got conflicting advice from both his dad's about life, money, and risks. Robert ended up following the advice given from his rich dad.
  • Rich dad and poor dad are stand-ins for the types of ways to think about money and finance.
    • Poor dad represents the ideals taught in the traditional schooling system, which is to go to school, get a good job, climb the ladder, buy a house, and eventually retire. 
      • Most people's parents come from this school of thought and so this is what gets passed down to their kids.
    • Rich dad represents a contrarian style of thinking, which is to work for a wage if you have to, but also figure out how to become financially free by having your money generate wealth and through taking calculated risks.
  • In the rest of the book, Robert explores the differences between the two dads when it came to mindset, strategy, and tactics.
Learning with Rich Dad
Robert ends up working for rich dad and eventually becomes really upset because of the little pay and the hours he has to work. He demands that rich dad treat him and Mike better and asks for a higher pay. Rich dad angered Robert and Mike on purpose to teach them a few lessons. The lessons were:
  1. A lot of people will take a job they don't like as well a lower pay than they deserve because of fear.
  2. Life is a bully that likes to push people. The problem is that most people let life push them around.
    • Sometimes people will even go and and get angry with life and push back against people like their wives, boss, or the world in general. This type of pushing back isn't helpful to anyone.
  3. Most people get stuck in a loop between fear and greed.
    • People are afraid of not having money and decide to work harder.
    • Once they get paid, greed makes people spend their money to get some sort of short lived satisfaction (usually some type of luxury) 
    • Soon people realize they want more things and more things cost more money so they work harder to try and earn more money so they can spend more money.
    • Even the rich fall into this trap and are subjected by the fear of loosing money.
  4. It's important to not give into your emotions when it comes to money and actually think.
  5. Incremental raises in salaries and hourly wages trigger a form of hope that makes people believe that their life is being incrementally advanced. This incremental change in pay ends up being a loop that keeps people from leaving and exploring their dreams.
  6. Learn to work for free, so your mind is forced to come up with opportunities to make money.
Lesson 1: The Rich Don't Work For Money-Money Works For Them
Most people work for money and take that money to buy things and save the remainder. This may make you stable, but never rich. Also, working for a pension makes you financially dependent.


Rich people don't get rich off of a high salary alone. They get rich by owning things


"(As tech investor Sam Altman says, “You get truly rich by owning things that increase rapidly in value. This can be a piece of a business, real estate, natural resource, intellectual property, or other similar things. But somehow or other, you need to own equity in something, instead of just selling your time. Time only scales linearly.”)"-Shortform Notes


The main idea regarding how to become financially independent is to have your money make you money so that you don't have to work. A way to do this is to use your income to buy assets that have the potential to return more income.


Financial independence, in this book, is defined when you don't need to rely on wages and salaries because you can live forever off the income your money makes.


The steps to financial independence are:
  1. Figure out the amount of money you need each year to survive comfortably.
  2. Figure out how much you need in assets to produce a return that exceeds the amount you need each year to survive.
  3. Work to acquire assets that bring about the number calculated in step 2.
Note: This obviously much easier said than done


Lesson 2: Buy Assets, Not Liabilities
In the book, Robert claims that a house is a liability. This is a rather controversial opinion and doesn't really make sense to me. His argument is that you don't get rental income on your house, but instead pay large expenses such mortgages and property taxes. Essentially, the money tied up as down payment and paying those large monthly expenses serve as a large opportunity cost.


The problem is that people need a place to live and that rent is also an expense. The writers at Shortform think a proper analysis would be to compare the cost of buying home (including down payments, annual expenses, and appreciation) with renting an identical property (including increases in rental cost that's proportional with the home value's appreciation, and the return on investment from the down payment  over time.)


I think Robert means well but isn't really communicating his ideas properly. I think what he's trying to say is that your house shouldn't be your biggest investment and to only buy a house you need. Essentially, you don't need to overspend on your house.


Robert's tips for liabilities and luxuries is to buy them used whenever possible and put the saved money towards something else. His tip is to also buy luxuries from the extra cash flow generated from your assets.


Assets are investments or business that don't require your presence.
Examples include:
  • Real estate to generate income. (He's basically saying get a house and collect rental income.)
  • Stocks, bonds, and mutual funds
  • Notes aka IOUs
  • Royalties from IPs

Robert also stresses to never dip into your savings or investments and to come up with creative ways for making money.


Most people have a habit of first paying their bills and then saving whatever money they have left. Rich dad payed himself first by buying assets and paid his bills as late as possible. He did this because the threat of having bill collectors come to his door was amazing motivation to find more ways to make money.


Lesson 3: Reduce Taxes Through Corporations
This chapter in the book is actual garbage because the advice isn't explained clearly enough. If you're interested in taxation, then talk to a tax attorney or consultant.


The essence of this chapter is that he believes taxes are good for no one and that the rich find ways to minimize the amount of taxes they have to pay.


Robert tells readers to form their own corporations because of these benefits:
  • Deduction for expenses. Basically throw everything under as a business expense, so you can use pre-tax money rather than post-tax money.
  • Lower tax rates
  • Alleged protection from lawsuits
  • Delaying taxes on real estate sales

Lesson 4: Overcome Your Mental Obstacles

  • Don't have self-doubt and have the courage to chase great opportunities.
  • Fear makes you play it safe and avoid potentially great opportunities.
    • This is actually true and well researched. People find losses to be more painful than equivalent gains.
    • Winning and being rich also require people to be unafraid of loosing. If you do loose, find a way to be inspired and learn from it.
  • Don't be afraid to take high risks.
  • Don't care what traditional thinkers are doing. Who cares if you're different. Focus on being the best you regardless of what other people think.
  • "Busy people are often the most lazy because they stay busy as a way of avoiding something they don't want to face."-Shortform Notes
  • Don't be arrogant or stubborn, learn to always welcome new ideas and work with people.
  • Don't let a lack of money stop you from making progress.
  • Don't be cynical and say things like:
    • "What if things don't work out"
    • "If it's such a good idea, how come someone else hasn't done it?"

Lesson 5: Keep Learning All the Time

Financial intelligence has 4 areas of expertise:
  • Accounting
  • Investing
  • Economic understanding of markets
  • Law
You would need to read more books and articles to further develop your knowledge in these fields.
  • Also be sure to learn quickly and be adapting

Specialists aren't often the richest people. Robert tells readers to learn broadly and master as many skills as possible. Skills like sales, marketing, communication, negotiating, investing, and people management.
  • These are all great skills to have but I also believe that the most amazing people are masters of the hard technical crafts such as advanced chemistry and math. Those are going to be the people who end up changing the world.

Lesson 6: How to Get Started

These aren't really ways you can get started, they are more like general nuggets of wisdom.
  1. Find a burning reason you want to succeed because without it, you won't make it.
  2. Invest your time, resources, and energy into educating yourself.
  3. Pick your friends carefully and make sure to learn from them.
    • Be friends with people who inspire you and are optimistic.
    • "Find someone who has done what you want to do and take them out for lunch"-direct quote
  4. Learn one way to make money and then master it. After that, learn a new way to make money.
  5. Don't put yourself into debt and pay yourself first.
  6. Pay people well.
  7. Buy Assets that generate income.
  8. Buy luxuries from the money earned from your assets.
  9. Emulate your heroes.
  10. Give to others first and it will come back. This is true for money, smiles, and friendship.
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    I'm Farshad, and I'm a curious PhD candidate in biomedical engineering at the University of Toronto. At the moment, I spend most of my time engineering DNA nanotechnologies 🧬, and researching how I can improve personalized medicine approaches. I also spend  a lot of time thinking about what I’m supposed to be doing with my life, and how I can be the best version of myself. This website hosts a collection of my over caffeinated thoughts regarding my life and the world, as well as my notes on the various books I’ve read.

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