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ОглавлениеBecome a Great Investor by Becoming a Great Student
When you hear the words “student,” “learning,” or “school” you might think about a period in your life that had something to do with words like “classrooms” and “homework” and “lectures.” But most of us can also think of times when we had some profound discovery experience outside a traditional classroom environment. For me, there’s nothing more exciting than when some piece of knowledge clicks and I get to watch it work. Like the first time I made a layup.
Man, I practiced and practiced my layup. I spent hours, focusing on each of the mechanics—dribbling toward the basket, aiming the ball at that sweetspot, holding the ball right for the shot, making sure I had the correct foot forward at the correct time—and when the ball finally bounced off the backboard and fell through the net? That was a great feeling. Now I don’t even have to think about it. A layup comes as naturally as running.
Investing has been the same way—though not nearly as tough on my knees.
If you like the feeling of excitement and possibility that comes with new discoveries, you can look forward to this journey of investment understanding. This book—and how I go about teaching—is different from those stiff Wall Street gurus or talking heads you see on TV. How so? Simple: Their run-of-the-mill advice directs you where they want you to go instead of where you want to go. I’m on your team to take you only where you want to end up. Because I’m not going to teach you where to go. I’m going to teach you how to go wherever you want.
We Are Both Students in This Together
I want you to know that I’m a student, like you. I’m hungry for knowledge that is useful. I love the time I spend with my mentors and teachers, and I know that there will always be more to learn. When people claim they have all the answers, I think they lose credibility from the start. Because the topic of stock market investing is so large and ever-changing, no one can know everything about it. It’s a moving target, at best.
This book is written to help folks who are beginners or people who see themselves as students with room to grow. Chances are that you and I are on the same path. I might be further along, but we’re both in the same jungle.
When I started learning about the stock market, I was sick of being a blind follower. I was dependent on the advice of others, and I didn’t have a way to determine if that advice was good or bad. I wanted to make some intelligent decisions and contribute to discussions with my financial advisors instead of just doing what I was told. I wanted to feel confident. You’ve probably felt the same way with your own financial responsibilities.
We are living in a very tricky time right now. The decisions you are forced to make about your future can be scary if you don’t know enough about investing.
This book will help you face the future with confidence. It will give you the confidence to know there are always opportunities for you to profit in any type of market: up, down, or sideways. You won’t be dependent upon others or even the direction of the market. With education comes options, and with options comes confidence.
Globally, we are rapidly approaching some very trying times. However, I’m convinced that you can prepare and profit no matter what happens.
Advice Is Not Education
Wall Street experts love to tell us what they think is best for our money, but they never seem to want to teach us anything. They like the relationship uneven. The less you understand about the stock market, the more dependent on them you will feel. They want you to be at their mercy. But I see people who are starving for real knowledge.
The so-called “experts” love to give you lots of advice and opinions. But advice is very different from education. Advice is being told what to do, whereas education is receiving real understanding—the kind of understanding that allows you to make your own decisions as to what to do. Education is transformation.
Today, you have the chance to choose the path of education and all of its rewards.
Transformation Is Evidence of True Education
For me, serving as a Rich Dad Advisor is a much different experience than many people might think. Frankly, my experience has been far more about my own learning and personal development than that of being a teacher. I have the gift of spending a lot of time with Robert and Kim Kiyosaki, and the other Advisors, so my opportunity to learn is both precious and humbling.
Robert, of course, is a very skilled teacher, yet he is also an insatiable student. His passion for education runs deep and is a fundamental part of who he is. He often reminds me of what education is and where the word comes from.
e·duce /Id(y)oōs/
Verb: Bring out or develop (something latent or potential).
Notice the word potential in that definition. To reflect upon all that we can choose to become is an exercise that is both exciting and staggering. You and I have the potential to land a 747. We can learn to play a musical instrument. We can learn to prepare a gourmet dish. We have the potential to build a house or sail a boat or speak a foreign language. The list is endless. In this light, the idea of education is elevated beyond the idea of merely transferring information from teacher to student. True education is about a transformational process that changes potential into real power.
Education is the process of empowering us to be able to do something we could not do before. Transformation is at the heart of the Rich Dad Mission:
To elevate the financial well being of humanity
Context and Content
Put simply, context is the big picture, content is the details. Information can be understood in various lights depending on the context in which it is held.
The more you learn about investing, the more convinced you will be of the importance of context. What I mean by that is that many people want to be taught what to do before they are taught how to think. This is backward.
Our context is often revealed by the questions we ask. The kinds of questions we Rich Dad Advisors often hear are along the lines of:
“If you had $10,000, what would you invest in?”
or
“What was the most recent stock you purchased?”
Yet almost no one ever asks these questions:
“Andy, what are you studying right now?”
or
“What is the last investing class that Robert signed up for?”
The first two questions show a context (or mindset) where the key to successful investing is nothing more than parking money in the right place. The wiser person sees investing in the context of being a student and learning and getting better at investing as a whole.
Robert Kiyosaki is a master of teaching context. For example, the CASHFLOW Quadrant does not teach how to buy real estate or how to invest in stocks. Yet it’s a very powerful teaching tool because it helps people shift their context. It helps people examine their philosophy and how they approach earning money, whether it’s as Employees (E), Self-employed professionals (S), Business Owners (B), or Investors (I).
Part of the power of the CASHFLOW Quadrant is that it invites each of us to examine who we are today and who we would like to become tomorrow. In many instances it suggests a profound transformation. Shifting context means improving perspective (the big picture). Studying content suggests expanding what we know (or the details) and the how-to instructions.
Of course this book contains content, which will help you learn more about the nitty-gritty of paper assets. But every bit of instruction must be applied within the proper context.
The Education Hierarchy ™
It is said that beauty is in the eye of the beholder. I’d say that the same is true with value. The value of some information might be priceless to some and worthless to others. Some education is important to everyone—reading, for example. I don’t think there are many of us who can achieve success in life without knowing how to read. But the importance of most education is more subjective than we normally think. What is vital to know and what isn’t really depends on your circumstances and your goals. For example, had I actually wanted to become an exercise physiologist like my college counselor had directed, knowing the difference between a tendon and a ligament would be really a big deal. But in my current life as student of investing? Not so much.
It bothers me that those on school boards have the power to impose their opinions on the rest of us. The school curriculum is based on what they think is valuable, and those assumptions can be inaccurate for your life’s goals. Some education really matters to the school board but doesn’t affect your financial life. Dissecting a frog comes to mind. The school board thought it was vital I learn to dissect a frog in high school. Well, I’ll tell you, I’m living proof you can live a good life without being an expert at dissecting a frog. I’ve done ok. I have a great family. I’ve made a good life. And the frogs of the world are just going to have to go on their merry way undissected.
Now, if I were going to be a biologist, it might be a different story. It might become vital I know how to dissect a frog. But that’s because of my circumstances and my goals, not some universal dictate of a bureaucracy. If I wanted to be a biologist I would be vitally interested in frog innards. I would want to know how the insides of a frog work. It would be a driving passion. I would be burning to cut open any unsuspecting frogs I could find. I’d be reading all about frog biology, watching frogs be dissected by experienced practitioners, practicing on fake frogs—anything I could do to learn. Just as it has been for me with stocks.
Perhaps some of the most vital education you can receive doesn’t even register on the school board radar screens, but is critical to your financial life. You might never have had a class on living a life without a job, but it may be one of your goals. You have likely never even had a class on the basics of the stock market, but the stock market is what millions of people are depending on for retirement. Evidently, these are trivial matters to the average school board. But these are subjects of vital interest to you and me.
Is that a problem? No. You don’t need to wait for someone else to dictate what is vital to your education. Not anymore. Not when you become a serious student, because being a serious student is being an active student. Your financial success is too important to leave it to someone else and their opinion of what’s important. I stopped being passive when it comes to education a long time ago.
I submit that becoming a successful investor begins by becoming a serious student. This is my invitation to you. It is an invitation to develop your own education hierarchy. You and I are now free from the school board’s assembly-line approach. You do not need to be force-fed from their “like it or not” menu anymore. Value is in the eye of the beholder, and you get to decide what knowledge is valuable to you!
Once you decide what is valuable to you, all of your education opportunities can be categorized as trivial, interesting, important, or vital. Don’t waste your time on the trivial. Then be mindful of wasting too much time on that which is merely interesting. Choose to focus on the important and the vital—that’s where you can best spend your time, your effort, and your money. When you set your goals, think about what you are learning in the context of the Education Hierarchy™. When you do, you’ll find that what you study will be more meaningful, more valuable, and more fun.
Make a list of classes you took in school and think about where these classes fit into your education hierarchy and reflect on how much or how little you use that knowledge each day. Then make a list of what you think you will need to learn to achieve the goals you have today. As you progress through this book, you might discover that mastering The 4 Pillars will be more valuable to you than anything you have ever studied before.
Traditional schools tend to focus on what they often refer to as “general education.” The first two years of a typical college experience usually include learning a few things about a bunch of subjects instead of learning a lot about a few subjects. That’s why you’ll often see people with majors as diverse as art history and pre-med taking the same classes their freshman year. That has never made sense to me. We might end up well-rounded, but we also end up bored—and we pay for the privilege with our time and our money. And you know what? I don’t want to be well rounded. I want to be really, really, really good at building cash flow. If I need to dissect a frog, I’ll hire a biologist.
That’s why the books in the Rich Dad Advisor series are so useful to anyone who wants to learn about investing. And with teaching tied to the four pillars, I promise not to waste your time with things that are merely interesting. Moreover, I can promise you that as an investor you will use each of these four pillars on a regular basis, and you will come to view them as vital in your investing.
The Education Continuum ™
The CASHFLOW Quadrant helps us figure out who we are and who we would like to become in terms of how we choose to earn money. The Education Continuum ™ helps us to evaluate our current education level and set vital goals related to where we want to arrive educationally and the degree of our transformation. Remember that true education is transformation. It changes us.
As you read this book, you will move along the continuum. Your context will shift as you evaluate where you are on The Education Continuum ™ and with each new topic of your financial education.
Ignorance
Ignorance simply means we’re not aware of something. If you’re ignorant of something, it doesn’t mean you’re stupid. I’ve observed that most of the people I teach in my workshops have a college education, and, quite frankly, most of them probably have higher IQs than I do.
My grades in school were pretty average—and sometimes even below average. The only reason I am the one who’s often teaching others is that I have been a student of investing for a longer period of time than most people. My mentors have been students of investing longer than I have been. I was smart enough to seek out those mentors—and listen to them.
What you lack in smarts or talent, you can make up for with passion and hard work. Effort is the great equalizer.
Most people don’t have a clue about the stock market because it’s not a topic that is taught effectively in traditional school environments. Realize that you’re a very smart person; you just have not yet focused your full intellect on learning about investing.
What makes paper assets somewhat dangerous is that, unlike real estate and business, almost anyone can buy stock at any time. And many people do. There is very little barrier to entry when it comes to the stock market.
Think for a moment about your country’s retirement system. In my home country, the United States, the dominant program is a contribution retirement program called a 401(k). In this 401(k) program, workers take a portion of every paycheck and let the “experts” in the financial industry spend it on mutual funds. The majority of these workers know next to nothing about the stock market: the risks, the fees, the laws, or even the basic details of a given plan. Like a herd of sheep, they are funneled into the stock market by the Wall Street sheep herders.
It takes only a little common sense to break from the herd and say, “I probably shouldn’t invest my money in something I don’t understand.” But evidently there aren’t enough “common” people in the herd because the herd is getting fleeced on a daily basis.
When we lose money in an investment, it’s most often because of something we don’t understand. I know that when I look back at my gains and losses, my biggest losses have come when I was delving into something I did not yet understand. More money is lost due to ignorance than anything else.
Luckily, we can escape ignorance.
Awareness
Moving from ignorance to awareness is a good feeling. It is illumination, it is discovery, and it’s awesome. But it’s impossible to set good solid education goals unless we discover a little bit about the things we need to learn.
I remember years and years ago when I took my first investing course. The instructor put several stock charts up on the screen and began to teach us about “technical indicators.” I remember thinking to myself, “This is one of the most impressive things I’ve ever seen.” I became very excited about what I was discovering. I could see that this was something I was going to want to study and learn more about.
When we have moments of discovery we simply learn about what’s possible. It was much the same as the first time I ever attended a concert as a child. The concert featured an extremely accomplished pianist, and I discovered what the possibilities were with that particular instrument. With playing the piano it’s pretty easy to feel the distance that exists between being aware of what the instrument’s potential is and becoming an accomplished musician.
As you read each chapter in the book you will become more aware of what professional investors actually do when they make investment choices. Chances are you will then want to delve even deeper. It’s natural to want to move from mere awareness to a more complete level of understanding. That understanding is called competency.
Competency
Think of an airline pilot who has passed a written test on flight regulations, but has not yet had a chance to practice what he has learned in the air. Think of a musician who has spent many months in a classroom learning to read music, but has yet to pick up an instrument and practice. Competency is that level of understanding that does not yet translate into ability.
Competency denotes a minimum amount of knowledge and skill to perform an act. In a court of law, a witness would be expected to be competent to testify. But competency is often associated with minimums. In most countries there are minimum competency tests for various professional licenses to practice medicine or law.
Competence denotes the ability to get an A on a written test. But understanding how something is done is not the same as being able to do it. The real world demands proficiency. Classrooms are havens of competency. Classrooms reward competency. You can move through your whole academic life with nothing more than competency.
There is little room for mere competency in the real world. The real world rewards proficiency. It’s much easier to describe than to go out and do.
In basketball, it’s easy to draw a play on a chalkboard. It’s the easiest thing in the world: just a bunch of Xs and Os, a few arrows here and there. Go out in front of 13,000 people and a couple of blind referees and pull it off—that’s a whole different ball game. That’s proficiency. Step onto even a college-level court and try to compete with just competency, and watch yourself learn the real meaning of getting schooled.
Proficiency
Closely related to the word competency is proficiency. Proficiency is a higher degree of competency, and that difference in degree can mean the difference between making money and being wealthy. If competency is knowing the play book, proficiency is execution of the play. Competency is the intellectual ascent to the truth. Proficiency is execution.
In my experience, proficiency is a pursuit and not a destination. We can always become more proficient. I hope that you will be more proficient in the stock market next year than you are today, and even more so the year after that. But, as I said earlier, the stock market is a moving target, and as it changes, so will you. As the markets change, as economies change, so will your need for changes in your knowledge base. You can never be satisfied with competence.
People wonder at what moment they will know that they are able to successfully trade stocks and options. I don’t know the answer to that question because proficiency is a process, not an event. I compare it to the drum lessons I took when I was a kid. I could always hit drums, but it sure didn’t sound very good at first—at least not to my parents. Today I can play in my rock band—and we’re not half bad. But it was a long process over many years of practice. There is never a singular moment where you say “yesterday I could not play but today I can.” There are milestones, however. If you have never owned shares of stock, there will be a day when you begin trading on paper or in a virtual account. There will come a day when you invest a small amount of real money. Then the day will come when you short a stock…and so on.
Over time, you travel along the Education Continuum to proficiency. But you can’t always put your finger on when those transitions happen. There are thousands and thousands of drummers more proficient than I’ll ever be (and that is true for investors as well), but there are probably many more thousands who are less proficient. I can play in my rock band and enjoy making music without effort. Because of my learning and practice, it’s now automatic, and it sounds like actual drumming to most people.
Confusing Awareness with Proficiency Will Cost You Money
Part of the value of the Education Continuum is the humility that comes with knowing that if you are an investor, you are also a student. One of the dangers of the stock market is its accessibility. Unlike playing the drums, you can play the market and not realize you don’t know what you are doing. I see some people make the leap to awareness and confuse that with proficiency. Sometimes this happens because of arrogance, and sometimes it’s merely from the excitement of discovery. If you keep yourself in check with the Education Continuum, you can avoid the costly tuition of the school of hard knocks.
Powerful Suggestions for Becoming a Great Student
Are you ready to take control of your education and become a serious student? Of course you are. You’re the one who knows what you want and what captures your interest. You know what is vital to your education and what is trivial. So let’s get down to some studying.
As Robert often teaches, there is a drastic difference between “reading” and “studying.” I’m going to help you supplement your reading with activities that will make this a study of investing that will actually apply to all the asset classes—not just the stock markets of the world. If you like the idea of becoming a serious student, the suggestions that make up the remainder of this chapter will ensure you a more rapid and powerful transformation than reading alone.
1. Discuss what you read and share it with others who share your interest.
2. Set education goals, not just lifestyle goals or money goals.
3. Begin working with mentors.
4. Do it now!
When you reach the end of this chapter, start writing down additional ideas of your own. Remember, you are now an active participant in your learning. Bring your own experience, your own stories, your own examples to your learning. And be ready to participate.
Share Your Discoveries with Others
You don’t have to become an expert to share what you discover. Let yourself get excited about what you’re learning. Share that excitement and your newfound knowledge with someone else.
I have found that teaching is a great way to learn. As you read, keep a pen or pencil handy to mark the sections that really resonate with you or that you feel you need to review. Write down notes in a journal or notebook, adding your own thoughts or examples. Sharing those notes and sections with someone else will help you remember what you learn. Explaining concepts to someone else will help you keep things simple and putting the ideas into your own terms and your own examples and stories will cement them in your brain. You will find that you can remember the things that you read and then share much better than the things you just read and keep to yourself.
Check out the Cone of Learning developed by Edgar Dale. Years ago he discovered that reading alone was actually one of the least effective ways to learn something new.
Source: Cone of Learning adapted from Dale, (1969)
Consider forming a group with two or three friends who are reading this book at the same time you are, and then meet for breakfast once a week to discuss what you’re learning. Be sure to steer clear of forming too many opinions too quickly. Just focus on what lessons are being taught, being sure to build on each section as you learn.
Review Your Education Goals Now
At the beginning of any journey, it is a good idea to set some goals. It’s not uncommon to have lifestyle goals. And it is not uncommon to have money goals. But few people I meet continue to set significant education goals once they leave school.
As you complete each chapter of this book, remember to keep setting education goals.
Lifestyle Goals
I’m sure that you and I will always have the desire to improve our lifestyles. We all have that in common. You can think of some of these specific desires for improvement as lifestyle goals. As I travel the world and speak at various events I often ask my students to list a few of their goals. Here are some common responses:
• I want to quit my job.
• I want to own a house on the beach.
• I want to own an exotic car.
• I want to travel the world.
• I want to be financially free.
• I want to help and serve others.
Go ahead and make a list of your own goals. Not the goals someone somewhere told you should have. But the goals that would make you happy. Write them down. No one has to see them; you don’t have to justify them to anyone. You know why they are important, and that’s enough. Write them down as the first step toward recognizing that you are in control of this journey. You decide what is trivial and what is vital—that is true for every aspect of your life, from your education to your goals.
Dreaming Is Free
I’m alarmed at how little time people spend dreaming these days. Nearly everywhere I visit, times have become so tough that people are concentrating on mere survival rather than making plans for abundance. The conversations people are having now about their finances are too often focused simply on getting by, rather than on achieving their full potential or exploiting their opportunities to the very maximum.
I like to remind people that dreaming is free. It’s an indulgence we need not feel guilty about. Wherever you live, you stand on the shoulders of those who went before you. I’m sure you can think of sacrifices made by others that have provided you with opportunities you can seize on this very day. When you think about it like that, not only is it okay to dream, but it’s actually a very important activity for you to do. You owe it to those who have gone before you to honor their sacrifices. You can enjoy time spent dreaming of the great things your future can hold.
Let your dreams fuel your determination and fill you with energy. Dreams unleash the power of both your conscious and subconscious mind. Dreaming feels good. Dreaming is good.
Take these dreams and turn them into goals by writing them down.
Money Goals
We can also have money goals. Money goals are different from lifestyle goals. But money goals alone tend to lose their power. They’re too vague, too dry.
• I want $1,000,000.
• I want $10,000 a month.
• I want to be free of debt.
For some people, perhaps these statements are more wishes than goals. But money goals become instantly more meaningful when they grow out of your lifestyle goals.
Let’s take an example of a goal to make $10,000. Standing alone, $10,000 is just money.
But if we start with a lifestyle goal, such as to buy yourself a top-of-the-line Harley-Davidson motorcycle, suddenly your heart beats faster and that dream starts to come alive. You might visit a dealership and pick the one you’ve always wanted. You could sit on it, touch it, and feel it. This becomes a very powerful experience for you.
Now it’s time to look at the price tag. How much money will you need to make that dream come true? If the price tag is $11,799, you now have a meaningful money goal. At this point you can choose to buy it outright or set a goal to increase your cash flow to cover a payment of $389 per month. Now your money goal is even more specific.
Education Goals
So how are you going to increase your cash flow by $389 each month? The good news is that earning that extra $389 per month is simply a matter of education and action. Some folks may think the only way to gain that amount is to cut an equal amount from their monthly spending. I don’t know about you, but I’m not really interested in giving up anything in my life. But there is another way—a better way. Instead of cutting your current spending, you can decide to learn how to acquire income-producing assets that will create that extra money for you.
What Is Wealth Building?
In a nutshell, wealth building is simply learning how to buy assets intelligently. These assets can come in multiple forms:
• Business
• Real Estate
• Paper assets like stocks
• Commodities like gold or oil
When I look at wealthy people like Warren Buffett, Donald Trump, and Robert Kiyosaki, I see people who have become wealthy because they have become educated about how to buy assets. I imagine they wake up in the morning and ask, “Where will I find an asset I can buy today?” They don’t need a hot tip. More importantly, they don’t sit around waiting and hoping for a hot tip to find them. They know how to look for and look at an opportunity and use their financial knowledge to decide whether to play or pass.
If someone with a financial education wants to buy a Harley, they don’t skip their morning latte and put their pennies in a savings account and until they have enough money. They don’t put it on a credit card and cross their fingers each month when the bill comes due. They don’t get a second job. What can you do when you want to make a lifestyle goal a reality?
• Start a business to earn the $389 per month...if we have a business education.
• Acquire a rental property to earn $389 per month...if we have a real estate education.
• Sell some covered call options to earn $389 per month...if we have an options education.
Now can you see that earning extra income is simply a matter of gaining the right financial education?
As we learn about these different asset classes, we can choose which ones we want to dive into and learn more about. Then we can set specific money goals tied to acquiring assets that will meet our lifestyle goals. We use education goals to achieve money goals to meet lifestyle goals. It’s a formula that works time and again for the wealthiest people in the world. And it can work for you, too.
Education gives you power.
When you think about it, you might find it striking that once people leave college, they often look only to lifestyle goals or money goals. Many folks draw a blank when asked about their education goals because they never learned to be an active participant in their learning.
The Best Path to Proficiency Is Mentorship
If you’re reading this book it’s likely that you’ve also read Rich Dad Poor Dad, which is the cornerstone of your financial education. You might take note of the fact that the book Rich Dad Poor Dad is primarily a story of mentorship. A great question to ask yourself after reading the book is: “Would Robert Kiyosaki have become successful without the help of his rich dad?” Knowing Robert as I do, I would say absolutely yes. But I would also say that he would have found another mentor. Even after his rich dad passed away, Robert still sought out new teachers and mentors, just as he does today.
When I read Rich Dad Poor Dad for the first time, I realized I wanted to find many rich dads to help me along my journey. I am always looking for fellow journeymen who are further along the path than I am. It’s just common sense.
If you have ever seen the movie The Karate Kid, you’ve seen a great portrayal of how a mentor can change a student’s context for the better. We all know the story, I think. (Or maybe I’m dating myself.) It’s the story of a student-mentor relationship that develops when an average kid decides to defend himself against the neighborhood bullies. The mentor agrees to train him, but the boy becomes frustrated almost immediately with his teacher’s unorthodox methods. Why? Because the student’s context is so different from that of his mentor. He believes that success is going to come by learning how to punch and kick. His mentor, being much wiser, begins the training in a very different way from what the boy expects.
In his thick Japanese accent, the mentor begins the first lesson by asking the boy if he is ready to begin.
“I guess so,” says the boy.
The wise old mentor tells the boy to sit down so that they can have a talk.
“Walk on road right side, safe. Walk on road left side, safe. Walk on road middle, sooner or later, get the squish, just like grape. Here, karate same thing. You karate do ‘yes’ or you karate do ‘no.’ You do karate ‘guess so,’ sooner or later, get the squish, just like grape. Now ready?”
“Yes, I’m ready,” says the student. And so they begin.
The mentor has a context. He knows that learning karate is a much more serious venture than his young student can imagine. To me it shows that the eagerness of a new student often overshadows his ability to think at a deeper level about where this new path will lead. It also shows how easy it is to get the squish. That’s an important lesson for us to remember as investors, too.
“Either you learn to invest ‘yes’ or you learn to invest ‘no.’ You learn to invest ‘guess so,’ sooner or later you get the squish, just like grape”
Still, it takes the boy actually getting the squish a few times before he learns to accept the mentor’s unorthodox training methods and realizes that learning karate will require his total commitment. His teacher invites him to enter into a sacred promise. The teacher’s job is to teach the student to the best of his ability, and the student’s job is to learn to the best of his ability and give his full effort.
The mentor emphasizes that the young boy will follow his instructions with no questions asked: “I say, you do. No question. Deal?”
“Deal,” the boy answers.
The boy thinks he’s going to be getting cool lessons on kicking and punching. He thinks he’s going to learn a couple of slick moves and go back to those bullies in a few days and take them down.
To the young man’s dismay, the first lesson has nothing to do with punching or kicking. Instead, the old man instructs the boy to wash several cars and wax them.
“Wax on, left hand. Wax off, right hand. Breathe in through nose, out through mouth. Very important.” Immediately, the boy questions the methods of the teacher only to be reminded of their promises to each other: “I say, you do. No question.”
Day after day, the boy is instructed to do various tasks that involve menial labor: waxing cars, painting fences, and sanding floors. With each passing day the boy becomes more frustrated because each day he arrives at the home of his mentor hoping to learn how to punch or kick.
Eventually the boy decides he wants to quit. At that moment the mentor shocks him by delivering a flurry of kicks and punches. The boy reacts instinctively and effectively blocks each punch and kick. By doing as his teacher has instructed, he has developed the muscle memory he needs to be able to defend himself without thinking. Waxing the cars, painting the fence and sanding the floors helped him learn and gain proficiency in a very natural way. He discovered and learned some things that were outside the traditional classroom through methods that he had never seen or experienced. Most importantly, his context dramatically improved. He was not only learning karate; he was becoming more mature. His philosophy began to change. His view of the world began to change and improve.
I smiled at the end of that movie, and I’ll tell you, I wasn’t the only one. When Daniel rears up into that crane move with his injured knee he triumphs over those bullies not just by being the better fighter, but by being the better person. He is completely transformed by his education with Mr. Miyagi. Education is transformation.
I know of no more powerful path to proficiency than when someone who is already proficient shows you the way. Even if you don’t recognize the path they walk.
The Fog of Concern
When I finished reading Rich Dad Poor Dad, my wife and I were raring to go. We wanted to start out by investing in real estate. But we still had not changed our context. We were still focused on buying things more than learning things. We had a desire to be rich so we wanted assets on day one, but we had not yet shown proper respect for gaining our financial education. As a result, investing was very difficult for us in the beginning.
We looked at many houses and became frustrated by what seemed like a fog of concerns. It was as if we could not see what was a good investment and what was not. Every time we got close to making a move, we began to worry. What if there’s mold? It looks good, but I don’t know anything about mold. What if I can’t get a tenant? Worse yet, what if I do get a tenant and they trash the place? Why does the guy want to sell it so low? It seems like it’s almost too good to be true, so there must be a reason why he wants to dump this on me. Can you relate to this? I had a deep desire to buy assets, but I was shrouded in the fog of these concerns.
I wanted to call Robert (who I didn’t know back then) and just yell, “Why couldn’t you just print the address of the house I’m supposed to buy?!” Because that seemed like the answer—buy the right property, rent it out, sit back, and collect rent. Rinse and repeat until wealthy. If only Robert would tell me the right property to buy.
I didn’t understand Rich Dad at all. I had missed the point completely.
But I didn’t give up. I was determined to learn this stuff. I reread the book. What did Robert have that I didn’t have? Duh. It was right on the cover in big yellow letters. He had a rich dad. He had a mentor.
My wife and I talked and changed our focus from looking for property to buy to looking for a mentor. And (go figure…) if that wasn’t exactly what we found as soon as we started looking.
Mentors and Criteria Clear the Fog of Concern
My wife and I ran into an old basketball buddy of mine named Greg. We started catching up and I asked what he was doing these days, and lo and behold, he was a real estate investor. Now, if I hadn’t changed my focus from finding property to finding people, that might not have even registered. But it did. He started talking, and my brain went…Bing! I started peppering him with questions. He was doing a couple deals a week buying residential properties, and had been in the business for about three years. From that I figured out three things: 1) if he’d been doing it that long, he must be more familiar with it than me, because he couldn’t take on that much debt and survive without knowing what he was doing, 2) he had to have a money source other than a bank because no way could he finance stuff that quickly through traditional routes, and 3) he had to have a way to find these deals because I’d looked at dozens of houses and I hadn’t bought one yet. So I knew he knew more than I did.
I was bold. I said, “Look, man, I’d really like to come to your office and just watch what you do.”
He was kind of polite and changed the subject, but I just kept at him. I explained that I’d been trying to do real estate and was getting nowhere. I said, “Look, Greg, I just want to see, when you pick up the phone, I’m just curious who you call. Because I have a phone but I don’t know who to call. And when you get in your car and drive somewhere, I want to see who an investor goes to see. Because I have a car but I have no idea who to go see. I just want to see what it is you do.”
But I wasn’t looking for a free ride. I didn’t just want (or expect) to get all of his knowledge for free. In fact I paid him about $10,000 for teaching me how his system worked.
Now, Greg, he was organized. He had systems and criteria for analyzing a deal I had never thought of. But more than that, the day my wife and I came in, he said, “You’re going to do a deal this week.” He had a private lender who didn’t care who I was as long as I could bring him a good deal. That was the first key. His investor cared about the deal, not me or my credit. This was definitely not a bank.
With Greg’s guidance, my wife and I found a good deal, got it in a foreclosure auction, refinanced it with a bank, and found a renter. We did it all with Greg standing beside us and showing us the way. There was no fog with Greg by our side. It all made perfect sense.
With Greg’s help, my wife and I learned that investing has a lot to do with measuring an opportunity against certain criteria, and then matching it with a technique to harvest the cash flow. With his help, we had our very first income-producing asset! I shudder to think how long it would’ve taken me to learn any of that on my own.
Bonus Training!
Take a peek inside one of my own mentor meetings:
Today I still work with mentors of all kinds. I have mentors to help with learning paper assets. I have mentors for business. I have mentors for health and wellness.
There Are No Money Problems
As a final thought to this chapter on the importance of becoming a great student, I want to offer you a vital truth: money comes from financial education. You don’t need to accept this right away, but you may someday come to realize that there are no true money problems—only education deficits. A lack of money is always secondary. It is never the primary problem.
As an investor, you’ll find that education goals are vital because education is precisely where money comes from.
Like most people, I used to find myself falling into the trap of thinking that I had a money problem. I can think of times when I wanted to buy something big that would take more money than I had. In this type of situation, it is easy to think that a lack of money is the problem.
Equally dangerous is the old cliché, “It takes money to make money.” This is a complete myth that needlessly stops many people from achieving their money goals. Money does not come from money; it comes from financial education.
Look again to some of our examples of financial success: Warren Buffett, Donald Trump, and Robert Kiyosaki. What if these men were stripped of all their money and assets today? What if they had to start over again with nothing? Would they remain poor or would they achieve success again? Of course they would find success. It’s ridiculous to think they wouldn’t. Their power comes from their education. The secret to their strength is their financial education. Their success comes from what they know, not from what they have.
Let’s go back to the list of lifestyle goals people commonly list:
• I want to quit my job.
• I want to own a house on the beach.
• I want to own an exotic car.
• I want to travel the world.
• I want to be financially free.
• I want to help and serve others.
In my workshops, I ask my students: “Why don’t you have these things already?”
No matter where in the world I ask this question, the answer is always the same, “Because I don’t have enough money.”
Never once, in any country, have I ever had a person reply, “Because I lack financial education.”
When I speak with people who are struggling financially they usually see themselves as lacking money. None of them see the problem as a lack of financial education—at least not at first. Once we realize that financial education is where money comes from, we can change things.
This is great news because if a lack of money was really the problem that would be a pretty big obstacle. I don’t have a Parable of the Money Tree for you!
While you can’t choose to have people, governments, or employers give you more money, you can choose to get educated. You can choose to be a serious student and learn more about money. People who become obsessed with money wind up in a very different place than people who become dedicated to transforming themselves. Remember that education is transformation.
The Parable of the Orange Tree
When I was a child my grandma used to peel oranges for me. Whenever I smell citrus I think of her. She told me how oranges were full of vitamin C and how they’d make me healthy and help me grow big and strong. When I teach with Robert and the rest of the Rich Dad Advisor team we often use analogies to illustrate financial terms. My grandma and her oranges helped me understand derivatives.
Simply stated, vitamin C is a “derivative” of an orange.
If you want vitamin C every day, you’ll probably become a hunter of oranges. But you’ll quickly become frustrated at having to work so hard every day to find another bit of vitamin C for yourself. You will spend your time, talent, and energy seeking oranges. Some days you might find an orange, and some days you might not. You will likely live in scarcity.
A wiser solution might be to think about derivatives. Yes, vitamin C comes from the orange. But where does the orange come from? Of course, oranges come from orange trees. Instead of focusing on orange hunting, focus on growing your own orange tree. Find out the best seeds to get, the best soil to plant in—everything you’ll need to ensure the most oranges from your tree. Now you have a plan for abundance. It’s true that you might have to wait a season or two, but by focusing on the tree you will soon have more oranges than you can ever consume by yourself. In fact, your problem will be figuring out how to give your excess harvest away. You will live in abundance.
I like to also think of money as a derivative. Our lifestyle goals will depend on money, but where does the money come from? Just as oranges come from orange trees and a good harvest comes from learning about growing oranges, money comes from financial education. So you can take your current amount of time, your current amount of talent, and your current amount of ability and simply shift your focus.
Instead of focusing on money you can focus on learning where money comes from. Instead of focusing on the orange, you focus on the orange tree and growing oranges. Now you have a plan for abundance. It is true that you’ll wait for a season when you focus on your financial education, but you’ll have more money than you will ever be able to consume by yourself. Your greatest challenge might be figuring out how to give your excess money away. This is where Bill Gates is today. He left Microsoft because he needed to devote his time to the Bill and Melinda Gates Foundation and figure out the most effective ways to give his money away. That’s not a bad place to be!
Chapter Summary
Let’s review some of the important points of this first chapter:
1. We can discover new things in different ways than we learned in school.
Learning does not need to be rigorous or difficult. In fact, learning is something our minds can do naturally and easily when we participate in the process. Discovery is a wonderful feeling; learning should be fun.
2. Context is about how we think.
We can often learn about our context by paying attention to the questions we ask. Content is about the details, the how-to of a given task. Context is about the big picture, the why we are doing the task.
3. Use The Education Continuum.
One of the most common mistakes to avoid is confusing awareness with proficiency. Set your educational goals within the context of The Education Continuum and know where you are in the process. It doesn’t matter where you are on the Continuum at any given moment. It only matters that you are honest about where you are and that you have a plan to continue moving toward proficiency.
4. Learn by teaching.
As you continue through the remaining chapters of this book, consider doing so with a pencil or pen and mark the sections that are particularly important to you and write down what you are learning so you can build on it as you go. Teach the things you discover to other people. This will help you remember more than if you simply read the book. Remember, you don’t need to be an expert to share the things that you are learning.
5. Educational goals enable us to meet money goals. Money goals help us achieve lifestyle goals.
To improve your standard of living, you can set lifestyle goals. Those goals will have more meaning when you actually research how much money it will take to purchase your lifestyle goals. Once you’ve established your money goals you can look at different ways you can create that money by increasing monthly cash flow rather than by just saving and scrimping or loading up credit cards. You can set some educational goals even after you have graduated from high school or college. Educational goals should be specific ways of learning how to get more cash flow so that you can achieve your money and lifestyle goals.
6. Seek out and find mentors.
As you focus your mind on investing, you’ll begin to see things differently. You’ll discover that some of the people you know and the people you need will become your allies. You will be on the lookout for mentors who can help you, and you’ll be eager to invite them into your circle. In the process, you will also become part of their circle.
7. Money comes from financial education.
Always remember the parable of the orange tree: Don’t be an orange hunter, be an orange tree grower. Focus on your educational goals, and the money goals will follow naturally.
