Saturday, April 13, 2013

Rich Dad on Ponzi:Kiyosaki really doesn't know anything

Robert T. Kiyosaki
Cover of Robert T. Kiyosaki
I've discussed a long time ago that Robert "Rich Dad" Kiyosaki is not the financial expert that he portrayed himself to be. He gave a lot of pithy (but generic) advice that is best only use for motivation, not specific concrete action.

However, when a Google search brought me to an article he wrote about Ponzi schemes, my interest is piqued. I've studied MLM, Pseudo-MLM scams, and Ponzi schemes for several years. I wouldn't call myself an expert, but I do a lot of research before expressing my opinion.

Is Robert Kiyosaki's article accurate and useful?

That's a resounding no. Kiyosaki has absolutely NO IDEA what is a Ponzi scheme, even though he quoted the Wikipedia definition. Kiyosaki went on blasting various "legal Ponzi schemes", such as Social Security, Pension, and so on, as well as made blanket accusations and declarations.

Kiyosaki called social security a "legal Ponzi", when leading economists, esp. one that literally wrote the book on Charles Ponzi, explained why that is wrong.

Kiyosaki called the stock market a "legal Ponzi" as well. Kiyosaki is well known for his aversion to stock market and preference for real estate and precious metals and indeed, has several books on the matters. Rich Dad's Prophecy basically claims that stock market will crash hard "soon". Even his game, "Cashflow", reflects this heavy bias.

But why does Kiyosaki claimed that stock market is a Ponzi? Because the poor people feed money from the bottom and ended up in the rich people on the top. However, that does not describe a Ponzi scheme at all. That describes a pyramid scheme. Ponzi scheme is a scheme where you paid early joiners with money from latecomers. That does NOT describe the stock market except in certain "pump and dump" cases, and pump and dump is already fraudulent.

Kiyosaki then threw in "MLM is not pyramid scheme" declaration. The problem is pyramid scheme has very little to do with a Ponzi scheme. This is a total non-sequitur. He then tried to throw in the "pyramid corporate structure" is the same as pyramid scheme (i.e. "businesses such as IBM are true pyramid scheme.") a very common defense by shady scheme promoters.

Kiyosaki then claimed "taxes is a Ponzi scheme". Well, you are NOT promised a return when you're taxed. Bogus!

Finally, Kiyosaki then claimed "pensions are Ponzi schemes". That is the *same* argument he tried with Social security, so I won't bother repeating it again. SOME pensions may be underfunded, but pensions are supposed to be supplemented with investment income (i.e. the fund manager should be turning a profit). Thus calling ALL pension funds Ponzi is basically false dilemma and therefore bogus logic.

Kiyosaki then threw in no less than TWO scams he had been a victim of... a pyramid scheme, and a Ponzi scheme.

All in all, Kiyosaki basically had a "stream of consciousness" rant where he wrote whatever came to mind without verifying the stuff is actually true or not, and thus, his knowledge of Ponzi scheme is just bad, and he contempt for status quo (taxes, social security) is plain as day.

You can read the article here:
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