Wisdom of Rich Dad

Listen to this fabulous Interview with Robert Kiyosaki and his sister Emi on the “Beyond 50 Radio Show.”

The topic was “God & Money.”

Emi is a highly devout Buddhist nun, ordained by the Holiness the Dalai Lama. Their two worlds collided when cancer and heart disease threatened Emi’s health and a bad insurance plan gave way to a situation which a Buddhist monk suddenly had to think about economics. Brother and sister became reacquainted and discovered each other’s philosophy.

Assume that you are considering investing $700,000 and that this is a large sum for you. Experts give you the names of two reputable investment houses of long standing. When you visit the first of these, Benjamin Company, Inc., the manager recommends Bailout Bonds as an excellent investment for you. He gives you good reasons for his recommendation and reassures you that he is very confident in his advice, which is based on the analysis of top experts. He urges you to act swiftly to avoid missing out.

As a cautious investor, you visit the other investment house that was recommended to you, Franklin Company, Inc., their manager advises you that Bailout Bonds would be a poor investment and that you would be better off holding on to your money than putting such a large amount into such a speculative investment. Like Benjamin’s manager, Franklin’s manager provides good reasons and she too is confident in her advice.

Given the conflicting advice, you decide to check the track record of each of these investment houses. Fortunately, numerous academic studies have been published on the accuracy of each firm’s investment recommendations since 1930. Each firm retains the advice of some of the best experts in the world. You find that on average, the Benjamin experts have been right for 50% of their forecasts – and wrong on 50%. Interestingly, the Franklin experts have exactly the same performance record.

What would you do? Our guess on what most small business people would do is to skip this investment opportunity.

The year 1930 is roughly the date of the first studies on the value of expert forecasts that relate to complex and uncertain situations. Contrary to popular opinion, the findings are consistent with our Benjamin versus Franklin story. For example, Philip E. Tetlock’s 2005 book, Expert Political Judgment describes how he recruited 284 people whose professions included “commenting or offering advice on political and economic trends.” He asked them to forecast the outcomes for various situations. By 2003, he had accumulated 82,361 forecasts.

The conclusions from the studies are that:

1) expert opinions are useless for forecasting related to complex and uncertain situations.

2) expertise does not help; College students do as well as seasoned experts at such forecasting.

3) experts’ statements about confidence have virtually no value. Indeed, if you put a group of experts in a room and have them make forecasts, their confidence goes up rapidly, but this has no relationship to accuracy.

The country faces a similar problem. But our leaders in Washington are not debating about their own investments. Instead, they are thinking about how to spend other people’s money. They have provided no scientific basis for their decision and they show no awareness of how one should properly approach such a forecasting problem.

There are ways to study this problem, but they should not be done in a rush, and they should not be done in group meetings.

We don’t know what will happen, but we do know what procedures to use to obtain scientific forecasts of the outcomes of various plans. Researchers in the field have been trying to spread the word on scientific (evidence-based) forecasting by making forecasting knowledge easily and freely available to others at http://forecastingprinciples.com

The question for our leaders is whether they should invest $700 billion when, despite their confidence, they are completely ignorant of the outcome of the investment plan.

Dr. J. Scott Armstrong. Professor, The Wharton School, University of Pennsylvania
Dr. Kesten C. Green. Business and Economic Forecasting Unit, Monash University.

By Todd Babiak, The Edmonton Journal

In the run-up to the last federal election, Stephen Harper was attacked by his opponents and critics for telling the truth — or what he saw as the truth.

As the stock market plummeted, he said, “I think there’s probably some great buying opportunities emerging in the stock market as a consequence of all this panic.”

Sophisticated political strategists recognized a way to demonstrate, poignantly, that Harper spends most of his time with rich people. The vast majority of Canadians are not rich, and most modern intelligence suggests that vast majorities — not elite minorities — decide the outcome of elections.

In fact, most of us are not only not rich: We’re a paycheque or two away from a financial crisis and all the desperation and humiliation that entails. If we have children, the fear of not paying those bills at the end of the month is magnified. In the midst of a recession that economists compare to the Great Depression, we lose sleep thinking about our families in grey-scale clothing, charcoal-faced and anemic, riding boxcars and begging the owners of car dealerships and rental properties for gruel and coffee. This “fear and ignorance” around money is the guiding theme of Rich Dad, Poor Dad, an anecdotal financial guidebook by Robert Kiyosaki, first published in 2000, that has since sold millions of copies around the world.

Kiyosaki recommends financial literacy, which few of us get from the education system. He recommends thinking about our assets in a new way and setting up personal financial corporations. Poor people, at best, study hard, find good jobs, and work diligently until they retire. They work for their money. Rich people acquire assets, usually with someone else’s money, and allow that money to work for them.

If simply reading Rich Dad, Poor Dad ensured financial fabulousness, we would be surrounded by millions of millionaires. Enter Darren Weeks, the “Canadian Rich Dad,” a boy who grew up in middle-class Hazeldean and now lives in St. Albert.

He started buying mutual funds in Grade 6. By Grade 9, he knew they were a ripoff. Weeks says he started buying properties in university and now owns scores of them. When he read Rich Dad, Poor Dad, in 2001, he immediately flew down to Phoenix to meet Kiyosaki. They struck an agreement so that Weeks would be the northern point-man for Rich Dad concerns, Canadianizing the wisdom in Kiyosaki’s books.

This week, Weeks has appeared in conference rooms across Greater Edmonton, pitching the Rich Dad philosophy and, of course, offering a financial opportunity for would-be investors. “He who raises the most money,” says Weeks, “wins.”

Of course, this is not the best time in world economic history to raise money. Credit markets are tight and we’re all a bit haunted by Bernard Madoff, the cultural heir of Charles Ponzi. Every day, I receive between five and 10 e-mails from strangers, offering risk-free get-rich-quick schemes, usually with a number of misspelled words. There was a tentative air in Conference Room 6 of the Fantasyland Ballroom on Tuesday, Budget Day, as Weeks prepared to address a crowd of approximately 100 people.

Like Kiyosaki, Weeks uses the mild shock tactic of insult. Mere minutes into his presentation, I felt like an idiot for having a job, for investing in mutual funds, for not leveraging the equity in my house, for not wearing a tie, for not carrying a business card that identified me as an investor or a businessman, for my banking habits, for working hard and — mea culpa — for knowing precisely nothing about money. I also felt a little guilty for having read Rich Dad, Poor Dad and for condemning myself to a life of poor-daddery anyway (sorry, kids, so sorry). It was a stirring, educational and profoundly unsettling three hours that felt like an hour-and-a-half, tops. Afterward, I spoke to Weeks, a much calmer figure when he isn’t on stage. “I do that same presentation 100 times a year,” he said, “and I love it every time. Is there risk in what I’m saying to these people? Of course there is. Anything can fail. But I do, sincerely, want every person who comes to my presentations to become rich. It’s very fulfilling for me.”

There was a long lineup of attendees at the back of the conference room, signing up for opportunities to invest in Fast Track Capital, a real estate investment firm Weeks and his partners have set up. It was a delicious prospect, to stop paying enormous management fees for mutual funds that consistently lose money, and to invest in something that seemed, well, perfect.

One bearded gentleman, a skeptic, complained in the back of the room that it had to be a sham. One of Weeks’s employees quietly subdued him and the man walked away, fuming. Another attendee wandered about in a suit, beaming.

“I’ve been following Darren’s career for at least four years,” said Larry Yakiwczuk, a derivatives trader who runs what he calls “a small online business.” He is actually one of the largest eBay retailers in Canada. “For people who don’t know much, investing with Darren is a great idea. The only reason I wouldn’t do it is I wouldn’t like to take a pay cut.”

Yakiwczuk and Weeks suggested the best possible route to financial literacy is to take a rich person for lunch. “The recession,” he said, “I love it! For people who know what they’re doing, it’s a phenomenal opportunity.”

I asked Yakiwczuk when he might be available for lunch. Indian? Greek? Italian?

tbabiak@thejournal.canwest.com

Business Plus, an imprint of Grand Central Publishing (Hachette Book Group), announced today that one of its flagship authors, Robert T. Kiyosaki of Rich Dad Poor Dad fame, will release an innovative new book, CONSPIRACY OF THE RICH: The 8 New Rules of Money, that will be available worldwide online — and for free.

The introduction has been released and is available on www.conspiracyoftherich.com as well as via a direct link from www.richdad.com

An unprecedented publishing event for Kiyosaki and The Rich Dad Company, CONSPIRACY OF THE RICH will be an interactive, “Wiki-style” project in which Kiyosaki will invite feedback, commentary, and questions from readers across the globe which will then be incorporated into the book as it is written and released, chapter by chapter, on the Internet. The entire process is interactive — featuring a blog written by Kiyosaki, forums with questions related to specific chapters where readers can share their comments and respond to forum posts from other readers, and an email process by which readers can send in their questions

This bold and unique approach will enable the millions of people around the world who have put the Rich Dad principles to work in their lives — as well as those who are challenged by today’s harrowing economic times — to engage directly with Kiyosaki and literally help him shape his new book as it is being written.

CONSPIRACY OF THE RICH will share Kiyosaki’s view of global economics and why people are now finding themselves challenged by these turbulent times. As Kiyosaki attests, people not only want solutions to their financial problems, but also real answers as to what created today’s economic chaos — and how it can be eased. As CONSPIRACY OF THE RICH will make clear, what appears to be the worst of times may very well be an opportunity in the making. In Kiyosaki’s opinion, people should expand their means and live a life that they want to live by investing in their financial education. “This is the right book… at the right time… at the right price,” said Kiyosaki, in reference to the free and universal access to this book. “This is not the time for traditional answers. The time for this book is now… and the Web will let us do that.”

“We are living in tumultuous, unsettling and frightening economic times,” said Rick Wolff, publisher and editor-in-chief of Business Plus and publisher of Rich Dad Poor Dad and the 26 books in the Rich Dad series, “and Robert believes that people today, perhaps more than ever before, are hungry for information and financial education.” Wolff stressed, “The fact that Robert is committed to writing and distributing a new book to the world for free is amazing to us, and indicative of his genuine concern for the challenging economic times in which we live. Today, more than ever, the world needs a voice they can trust and someone they can rely on to deliver the cold, hard facts about what is really happening in the world.”