Historical article note: This article was originally published on 2019-11-13. Rates, policies, home prices, statistics, product names and qualification standards reflect the environment at that time and may have changed. This archive is for historical record and general education only. It is not mortgage approval, investment, legal or tax advice.
"'Henry Wang in Canada' has a WeChat public account with a subscriber gender ratio that remains around 41:59. Some friends then jokingly call me a friend of women. Topics such as family finance, private property economics, and real estate investment unexpectedly show a prevalence of female interest. Family wealth management involves two aspects: earning and managing; both offense and defense are indispensable. Financial management touches the family’s entire lifestyle and may require the decision of the woman who has the say in the household, which might explain why most of the readers are female.
'Rich Dad Poor Dad' is a popular finance book published in 1997. This book, published 22 years ago, has influenced many people, including Chinese readers. Twenty years ago, it was easy for Chinese people to understand the E quadrant, meaning office workers; but understanding the other quadrants was a bit difficult. At that time, the S quadrant corresponded to individual business owners, not the self-employed professionals we see today; B quadrant referred to township enterprise owners; capitalists in the I quadrant were still rare in China. The book is not called 'Poor Mom and Rich Mom,' which fits the North American situation: fathers are usually the breadwinners of the family; if the father’s financial mindset goes wrong, it can ruin the whole family.
Many Chinese families who emigrated to Canada are actually quietly following the path of the 'poor dad.' Walking this path doesn’t require much thinking or learning financial knowledge, which suits families who start making a living immediately after immigration. Therefore, the situation we see is that even today, there are far more poor dads than rich dads, and these poor dads who need remedial learning ironically have no time to study financial literacy.
01 Do people really not understand 'Rich Dad Poor Dad'?
I don’t want to belittle anyone’s intelligence behind their back, but I will state openly: too many people haven’t understood this little book. After I added the 19th way to become poor in the comments section of my article '18 Ways to Become Poor,' a friend privately messaged me asking, 'Why is living in a big house the 19th way to become poor?' I replied, 'Go read 'Rich Dad Poor Dad'.' The person quickly responded, 'This book is right by my pillow.' I was momentarily speechless, then realized that many people who have read this book have blocked out the information they didn’t like, so they fundamentally cannot understand it."
"Poor Dad" is the author's, Robert Kiyosaki's, biological father. He was highly educated, worked in education, and considered himself to have a respectable profession. He lost his job at the age of 54 and achieved nothing afterward, ultimately dying in regret and poverty. Kiyosaki provides two detailed descriptions when recounting his biological father's experiences: 1. The details of the phone call with Kiyosaki when his father planned to compete with his superior for a parliamentary seat; 2. The decision-making process when his father decided to buy a larger house for himself. We can analyze the common traits of all "poor dads" from these two points.
"Before the 'Poor Dad' ran for office, he worked in the education sector and everything was going smoothly. The education sector, similar to government civil service, seems stable but is particularly fragile, and compared to a renovation worker or a taxi driver, there is a greater fear of unemployment. When deciding to enter politics and run for office, changing his career path, the reason 'Poor Dad' gave was: 'Whenever I see the truth behind the scenes, my conscience is tormented…' Readers of *The Crowd: A Study of the Popular Mind* know that in every country's election, opponents are always portrayed as utterly wicked hypocrites, right? Once the election is over, everyone immediately returns to being normal. If someone truly believes that they must personally run for office to uphold justice, that person cannot get elected. For office workers, job security outweighs everything. Without a bit of patience, endurance, and willingness to bear hardship and work diligently, it is hard to hold onto a job. 'Poor Dad' wanted to change fields and switch to a secure 'iron rice bowl'; how easy could that be? If one decides to be a worker, the proper way to get rich is not to smash your own rice bowl, burn your bridges, and wander aimlessly running into obstacles; rather, it is to plant on public land while raising a goose in your backyard that lays golden eggs."
In his book, Kiyosaki describes his poor dad's decision to buy a big house as follows: "As both my dads became more successful, they made more and more money, but my biological dad fell into a deeper debt crisis. He worked hard, and after his income increased, his tax bracket also increased. His bank account manager and accountant advised him to buy a bigger house to achieve so-called 'tax relief.' My dad accepted this advice and bought a bigger house, so he had to work even harder to earn money to pay off the new mortgage... The result was that he became increasingly distant from his family. "Interest on US owner-occupied loans is tax-deductible, so the accountant gave this advice. Let me tell you something unfortunate: whether in Canada or the US, accountants' financial literacy is generally very low. They are blinded by the word "tax saving" and have no idea there is a way to get rich by paying more taxes. Interest on self-occupied loans can be deducted in the U.S., but property taxes cannot, heating fees cannot, lawn mowing and snow removal service fees cannot, repair costs can't be deducted, and mortgage principal can't be deducted. These non-deductible expenses must be paid with after-tax income, so you have to raise your wages to cover them. And with higher wages, the tax bracket rises accordingly, dragging you onto the "tax-saving" treadmill. On the other hand, the vanity of educators perfectly matches the suggestion of living in a big house—a perfect match.
Working decently, carrying a huge mortgage for their own home, living in a respected community, worrying about the risk of unemployment, never reading any financial articles or books—do you have such a poor dad around you? Is he your husband? It's time to wake them up. In my opinion, there is no distinction of nobility in professions; the standard of being respected should be measured by the amount of tax paid.
People cannot fail to understand the content of 'Rich Dad Poor Dad,' but the advice suggesting that readers change their income quadrant is difficult to accept, so this content is automatically filtered out by readers. For an employee in the E quadrant to transition to self-employment in the S quadrant, essential skills and necessary capital are required, as well as the transaction costs of engaging in market exchanges with other economic entities. Among all different forms of income, employees are the most path-dependent; existing knowledge and experience do not necessarily allow one to survive independently, and even if someone wants to switch lanes, it is not easy. 'Rich Dad Poor Dad' not only proposes advice on changing income and survival paths, but also includes suggestions for changing lifestyle, such as declining to buy a large home solely to avoid taxes. If one neither wants to change income and survival paths nor change lifestyle, they can only repeat the life of a 'Poor Dad.'
02 After graduating from school, you need extra tutoring
No matter which prestigious school one graduates from, essential life courses still require extra tutoring. An episode of 'The Stand-Up Show' demonstrated how graduates from prestigious schools can work their magic, allowing strangers to know within 5 minutes that they graduated from a top school. I have encountered countless such experiences in my life, and I believe readers have experienced them too. Regardless of the school or major, personal finance is never taught, and wealth does not recognize prestigious schools. The content in the Kiyosaki series of financial literacy books would need a long historical process to be included in middleschool or university curricula, but people only live one lifetime, and our generation is destined to learn and achieve success on our own.
The science most related to life is social science, among which economics is known as 'the science of life.' We live in a society of scarcity, and specialization makes it impossible for anyone to be self-sufficient. Especially in urban life, we need to participate in social division of labor and exchange, so we have to understand the market and know what others want from us. This is what economics should originally be able to tell us. Unfortunately, even in Western countries, economics textbooks in schools are full of errors and provide little help in understanding how the economy works or how private property accumulates. On the contrary, some 'outdated' economic clichés have been proven correct in practice, such as Adam Smith's 'The Wealth of Nations' and marginalized Austrian school economics books. So far, no one has integrated these correct economic ideas with current financial products and services in a timely manner, leaving poor dads with neither the time to read the traditional, correct economics books nor the trust in the brightly printed financial bestsellers. Not being able to find textbooks has also become a reason for poor dads to not attend financial literacy tutoring classes.
Adults seem to know to enroll their children in some interest classes, tirelessly driving them there and back, and generously paying for extra lessons, yet they don't know what they themselves should be trying to improve. Nowadays, poor dads have already happily accepted the reality of being a poor dad, and most poor dads naturally feel that there's nothing wrong with being a poor dad for their children. You see, if a child has a poor grandfather and a poor dad, it's quite fair. Times have changed. In 1949, everyone was united against poverty, personal assets were wiped out, and every person had a poor dad; this was in line with the trends of history and politically correct. But after 1978? What about after emigrating to Canada? The father of someone else's child may not necessarily be a poor dad. A poor dad's child losing at the starting line can't be remedied simply by attending a few extra tutoring classes. After a poor dad graduates, the debts that weren’t settled through tutoring—if passed from father to son—how much tutoring would the child need just to catch up?
03 The Way Out for Poor Dad
At my age, who doesn't have a poor dad? If you don't want to pass 'poverty' on to the next generation, what poor dads need to do is take extra classes and pass on their personal experience of overcoming poverty to the next generation.
What a poor dad can do is to assess whether it is possible to change his survival and income trajectory, moving from the E quadrant to the S, B, or even I quadrant. If he is already too deeply trapped in the E quadrant and finds it difficult to turn around, the best approach is to work directly towards the I quadrant: while working for an employer, raise a goose that lays golden eggs, and devote more time and energy to 'wealth-building businesses.'
To accumulate private wealth, you must use tools; otherwise, how are you any different from your colleagues? There are only two wealth tools: compound interest and leverage. Buffett creates wealth by carefully maintaining the compound interest machine; Robert Kiyosaki creates wealth by carefully maintaining the leverage machine. If a poor dad wants to escape poverty, he must choose one from these two golden-egg-laying geese and nurture it carefully. You can't kill the goose for eggs until you really need to eat. Many poor dads go through great trouble in the process of choosing a goose, blindly going for any investment they hear is 'good.' Little do they know, many geese said to bring wealth not only won't lay golden eggs, but are also geese that would harm themselves. Early investors in any investment product are usually like chives being harvested, and only two asset repositories have stood the test of time and are safe: stocks and real estate. As long as capitalism continues to develop, stocks will remain viable; as long as people long for urban life, city real estate will continue to appreciate. For a poor dad to escape poverty, the problem is not choosing a new type of goose, but selecting one of the two known golden-egg-laying geese and nurturing it for the long term. Raising a goose, like having the ability to farm for an employer, requires learning and practice.
The knowledge a poor dad needs to supplement about raising geese can be collected in fragmented time, or you can ask experienced former poor dads who have escaped poverty. In short, if you don’t learn anything, you are destined to remain poor to the end. No matter how the times develop, as long as scarcity still exists, the day when wealth falls from the sky will never come.