Investments of the Rich

Although many things ran through my mind that night, I was most intrigued by
the idea that there were investments only for the rich, and then there were
investments for everyone else. I remembered that when I was a kid working for
rich dad, all he talked about was building his businesses. But now that he was rich,
all he talked about was his investments . . . investments for the rich. That day over
lunch, he had explained, “The only reason I built businesses was so I could invest
in the investments of the rich. The only reason you build a business is so that your
business can buy your assets. Without my businesses, I could not afford to invest
in the investments of the rich.”
Rich dad went on to stress the difference between an employee buying an
investment and a business buying an investment. He said, “Most investments are
too expensive when you purchase them as an employee. But they are much more
affordable if my business buys them for me.” I did not know what he meant by
that statement, but I knew this distinction was important. I was now curious and
anxious to find out what the difference was. Rich dad had studied corporate and
tax law and had found ways to make a lot of money using the laws to his
advantage. I drifted off that night excited about calling rich dad in the morning and
saying softly to myself, “investments of the rich.”
The Lessons Resume
I had spent many hours as a child sitting at a table in one of rich dad’s
restaurants as rich dad discussed the affairs of his business. At these discussions, I
would sit and sip my soda, while rich dad talked with his bankers, accountants,
attorneys, stockbrokers, real estate brokers, financial planners, and insurance
agents. It was the beginning of my business education. Between the ages of 9 and
18, I spent hours listening to these men and women solve intricate business
problems. But those lessons around the table ended when I left for four years of
college in New York, followed by five years of service with the Marine Corps.
Now that my college education was complete and my military duty nearly over, I
was ready to continue the lessons with rich dad.
When I called him the next day, he was ready to begin my lessons again. He
had turned the businesses over to Mike and was now semiretired. He was looking
for something to do rather than play golf all day.
When I was young, I did not know which dad to listen to when it came to the
subject of money. Both were good, hard-working men. Both were strong and
charismatic. Both said I should go to college and serve my country in the military.
But they did not say the same things about money or give the same advice about
what to become when I grew up. Now I could compare the results of the career
paths chosen by my rich dad and my poor dad.
In CASHFLOW Quadrant, the book that follows Rich Dad Poor Dad, my poor
dad advised me to “Go to school, get good grades, and then find a safe secure job
with benefits.” He was recommending a career path in this direction:

On the other hand, my rich dad said, “Learn to build businesses and invest
through your businesses.” He was recommending a career path that looked like
this:

The CASHFLOW Quadrant is about the core emotional differences and the
technical differences among the people found in each of the quadrants. These core
emotional and technical differences are important because they ultimately
determine which quadrant a person tends to favor and operate from. For example,
a person who needs job security will most likely seek the E quadrant. In the E
quadrant are people from janitors to presidents of companies. A person who needs
to do things on his or her own is often found in the S quadrant, the quadrant of the
self-employed or small business. I also say that “S” stands for solo and smart,
because this is where many of the professionals such as doctors, attorneys,
accountants, and other technical consultants are found.
The CASHFLOW Quadrant explains a lot about the difference between the S
quadrant—which is where most small-business owners operate—and the B
quadrant—which is the quadrant where big businesses are found. In this book, we
will go into much more detail about the technical differences, because it is here
that the differences between the rich and everyone else are found.
The Tax Laws Are Different
The differences between the quadrants play a very important role in this book.
The tax laws are different for the different quadrants. What may be legal in one
quadrant is illegal in another. These subtle differences make big differences when
it comes to the subject of investing. When discussing the subject of investing, my
rich dad was very careful to ask me from which quadrant I was planning to earn
my money.
The Lessons Begin
While Mike was busy running their empire, rich dad and I were having lunch
at a hotel on Waikiki Beach. The sun was warm, the ocean beautiful, the breeze
light, and the setting as close to paradise as you can get. Rich dad was shocked to
see me walk in wearing my uniform. He had never seen me in uniform before. He
had only seen me as a kid, dressed in casual clothes such as shorts, jeans, and
T-shirts. I guess he finally realized that I had grown up since leaving high school,
and by now had seen a lot of the world and fought in a war. I had worn my
uniform to the meeting because I was between flights and had to get back to the
base to fly that evening.
“So that is what you have been doing since leaving high school,” said rich dad.
I nodded my head and said, “Four years at the military academy in New York,
and four years in the Marine Corps. One more year to go.”
“I am very proud of you,” said rich dad.
“Thanks,” I replied. “But it will be nice to get out of a military uniform. It’s
really tough being spit on or stared at, or called ‘baby-killers’ by all these hippies
and people who are against the war. I just hope it ends soon for all of us.”
“I’m just glad Mike did not have to go,” said rich dad. “He wanted to enlist
but his poor health kept him out.”
“He was fortunate,” I replied. “I lost enough friends to that war. I would have
hated to have lost Mike too.”
Rich dad nodded his head and asked, “So what are your plans once your
military contract is up next year?”
“Well, three of my friends have been offered jobs with the airlines as pilots.
It’s tough getting hired right now but they say they can get me in through some
contacts they have.”
“So you’re thinking of flying with the airlines?” asked rich dad.
I nodded slowly. “Well, that’s all I’ve been doing . . . thinking about it. The
pay is OK, and benefits are good. And besides, my flight training has been pretty
intense,” I said. “I’ve become a pretty good pilot after flying in combat. If I fly for
a year with a small airline and get some multi-engine time, I will be ready for the
major carriers.”
“So is that what you think you are going to do?” asked rich dad.
“No,” I replied. “Not after what has happened to my dad and after having
lunch at Mike’s new home. I lay awake for hours that night and I thought about
what you said about investing. I realized that if I took a job with the airlines I
might someday become an accredited investor. But I realized that I might never go
beyond that level.”
Rich dad sat in silence, nodding ever so slightly. “So what I said hit home,”
rich dad said in a low voice.
“Very much so,” I replied. “I reflected on all the lessons you gave me as a kid.
Now I am an adult and the lessons have a new meaning to me.”
“And what did you remember?” asked rich dad.
“I remember you taking away my 10 cents per hour and making me work for
free,” I replied. “I remembered that lesson of not becoming addicted to a
paycheck.”
Rich dad laughed at himself and said, “That was a pretty tough lesson.”
“Yes it was,” I replied. “But a great lesson. My dad was really angry with you.
But now he is the one trying to live without a paycheck. The difference is he’s 52
and I was 9 when I got that lesson. After lunch at Mike’s, I vowed that I would not
spend my life clinging to job security just because I needed a paycheck. That is
why I doubt that I will seek a job with the airlines. And that is why I’m here
having lunch with you. I want to review your lessons on how to have money work
for me, so I don’t have to spend my life working for money. But this time, I want
your lessons as an adult. Make the lessons harder and give me more detail.”
“And what was my first lesson?” asked rich dad.
“The rich don’t work for money,” I said promptly. “They know how to have
money work for them.”
A broad smile came over rich dad’s face. He knew that I had been listening to
him all those years as a kid. “Very good,” he said. “And that is the basis of
becoming an investor. All investors do is learn how to have their money work hard
for them.”
“And that is what I want to learn,” I said quietly. “I want to learn and maybe
teach my dad what you know. He is in a very bad way right now, trying to start
over again at the age of 52.”
“I know,” said rich dad. “I know.”
So on a sunny day, with surfers riding the beautiful waves of the deep blue
ocean, my lessons on investing began. The lessons came in five phases, each phase
taking me to a higher level of understanding… understanding the thought process
of rich dad and his investment plan. The lessons began with preparing mentally
and taking control of myself . . . because that is the only place that investing really
takes place anyway. Investing ultimately begins and ends with taking control of
yourself.
The lessons on investment in Phase One of rich dad’s investment plan are all
about the mental preparation it takes before actually beginning to invest. Lying in
my bunk that night in 1973, in a dingy room on base, my mental preparation had
begun. Mike was fortunate enough to have a father who had accumulated great
wealth. I was not that fortunate. In many ways, he had a 50-year head start on me.
I had yet to start. That night, I began my mental preparation by making a decision
between job security as chosen by my poor dad, or pouring a foundation of real
wealth as chosen by my rich dad. That is where the process of investing truly
begins and where rich dad’s lessons on investing start. It starts with a very
personal decision . . . a mental choice to be rich, poor, or middle class. It is an
important decision, because whichever financial position in life you choose—be it
rich, poor, or middle class—everything in your life then changes.