Book Review - Cash Flow Quadrant27 Oct 2011
I’ve been wanting to review this book for some time now and I hope I do it justice with my quick overview. I’ll try to keep it simple as the book sometimes sounds a lot like a late night get rich quick scheme but there are slices of nuggets in there that are worth picking it up. What I find interesting is that I started reading it thinking that it would be the least interesting in the Rich Dad series for me and turned out to be a gold mine in psychological perspectives and human to human interactions. Having grown up around many of the types of people this book explains, I thought I’d break down the most important concepts in the book.
If you own a business than you need to read the “Cash Flow Quadrant” by Robert Kiyosaki which by far I think is one of the best psychological analysis of the business world as a whole. In the book he splits all of society up into four basic categories, Employees, Self-Employed, Business Owners and Investors. Without going into much of the books other more infomercial like components you need to understand this is actually a very astute comparison to make. I grew up in a very business minded home and was always taught to stay in school and get the piece of paper but think differently about what it is that I want to do with my life. The examples in the book came to life for me because I’ve seen every aspect of them first hand as you probably have as well, but it’s important to note that there is no right or wrong position to be in one of the 4 categories, you can be successful in all of them, but what is important is the mindset you have in the process.
He goes on to explain that Employees use words like “benefits” and “security”. He says that what he thinks drives them sometimes is fear but I think it’s more a factor of stability, there’s nothing wrong with that if what you’re looking for is a stable life, it’s just most Employees don’t prepare for the lack of stability towards the end of their lives and usually hand their money over to a sales man who sells them on a bond or securities portfolio and that’s when most get into trouble.
The Self employed in the book are like my father, again nothing bad about being a lone wolf or a specialist at something and working for yourself but for them money is not important, “independence” and “freedom” are. They are sometimes considered experts in their fields and like to do things their own way. Quality of work is much more important than money.
Business owners look for the best Employee’s and the Self Employed and are the ones that look to hire them so that they can keep their minds busy with the occupation of thinking. This may seem wrong as many Self Employed people consider themselves Business Owners but the book gives an interesting difference between the two. If you can walk away from your business without having a hand in it letting managers and the people you’ve hired to handle the day to day concerns than you’re a Business Owner, a real Business Owner can leave his business for a year, and return to find it more profitable. They build a system that is capable of running on its own, with capable managers. There are not that many good Business Owners in the world that can do this successfully but the occupation of thinking that I was discussing before involves focusing your energies on new Products, business concepts and ideas of course.
Investors make money with money. They don’t have to work because their money is working for them. This is how the book says “great wealth is made” but most people aren’t looking for that so it really doesn’t matter. To those that are but have never successfully gotten to that point, it’s their way of thinking that tends to keep them from being able to achieve it, like a Self Employed person wanting to make millions when they won’t hire anyone else, or the Employee hoping to invest in the stock market all the while someone is collecting fees for every stock purchased or month gone by. If wealth is the number of days one can survive without physically working and still maintain their standard of living, then investors can simply do nothing and their grandchildren will still be provided for. Some investors are considered employees, but only in their own corporations and for tax reasons.
If you haven’t had a chance to read it, pick it up on Amazon for cheap or get the audio book, it’s well worth the read to understand at a psychological level how people in business really think and what drives them.