By Robert t Iiiyosaki with Sharon L Lechter, C,P,A,

WARNER
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CASHFLOW
-C4("1". Rich Dad's Guidi
RICH DAD'S CASHFLOW QUADRANT will reveal why some people
work less, earn more, pay less in taxes, and feel more
financially secure than others. It is simply a matter of knowing
which quadrant to work from and when.
Have you ever wondered...
• What is the difference between an employee and a business owner?
* Why do some investors make money with little risk while most other investors just
break even?
• Why do most employees go from job to job while others quit their jobs and go on
to build
business empires?
* Why, in the Industrial Age, did most parents want their children to become
medical doctors,
accountants, or attorneys._ and why, in the Information Age, are these professions
under
financial attack?
Have you noticed that many of the brightest graduates from our universities want to
work for
college dropouts, ..dropouts such as Bill Gates, Richard Branson, Michael Dell, and
Ted
Turner? Dropouts who today are the mega-rich of society.
This book will answer some of these questions and also assist in guiding you to
find your own
path to financial freedom in a world of ever-increasing financial change.
It is a book written for...
• people who are ready to move beyond job security and begin to find their
own world of financial freedom.
• people who are ready to make deep professional and financial changes in their
lives.
• people who are ready to move from the Industrial Age to the Information Age.
"This book is about choosing new options, new directions, and a new financial
future."
—Robert T. Kivosaki
"You cannot teach a person anything; you can only help him find it within
himself."—Galileo
"Many people will not head down the street until all the lights are green. That is
why they
don't go anywhere."—Keith Cunningham, cofounder of Prime Cable
"RICH DAD'S CASHFLOW QUADRANT provides a road map to
financial success." —Sharon L. Lechter, C.P.A.
Mich-
Sharon L. Leaner
C.RA., inventor,
Business Executive
uadranr..
to Financial Freedom
Robert T. Kiyosaki
Inventor
Entrepreneur
Educator
'Man is born free;
and everywhere be is in chains.
One thinks himself the master of others,
and still remains a greater slave than they."
Jean Jacques Rousseau
My rich dad used to say, "You can never
have true freedom without financialfreedom."
He would go on to say, "Freedom may be free,
but it has a price." This book is dedicated to
those people willing to pay the price.

w
WARNER
BUSINESS
BOOKS.
Employee, Self employed,
Business Owner, or Investor...
Which is the best Quadrant for you?
By Robert T. Kiyosaki
with Sharon L Lechter C.P.A.
Published by Warner Books
0
A Time Warner Company
If you purchase this book without a cover you should be aware that this book may
have been stolen property and reported as "unsold and destroyed" to the publisher.
In such case neither the author nor the publisher has received any payment for this
"stripped book."
This publication is designed to provide competent and reliable information
regarding the sub-
ject matter covered. However, it is sold with the understanding that the author and
publisher
are not engaged in rendering legal. financial, or other professional advice. Laws
and practices
often vary from state to state and if legal or other expert assistance is required,
the services of
a professional should be sought. The author and publisher specifically disclaim any
liability
that is incurred from the use or application of the contents of this book.
Warner Books Edition
Copyright © 1998, 1999 by Robert T. Kiyosaki and Sharon L. Lechter
All rights reserved.
Published by Warner Books in association with CASHFLOW Technologies, Inc.
"CASHFLOW" is the trademark of CASHFLOW Technologies, Inc.
E B EDI
S I si
are trademarks of CASHFLOW Technologies, Inc.
S
Warner Books, Inc., 1271 Avenue of the Americas, New York, NY 10020
Visit our Web site at www.twbookmark.com
CD
A Time Warner Company
Printed in the United States of America
First Warner Books Printing: May 2000
1 0 9 8 7 6 5 4 3
ISBN: 0-446-67747-7
Designed by Insync Graphic Studio, Inc.
To Our Friends,
The phenomenal success of Rich Dad Poor Dad has brought us thousands of
new friends all over the world. Their kind words and friendship inspired us to
write The CASIIFLOW Quadrant which, in reality, is a continuation of Rich Dad
Poor Dad
So to our friends, old and new, for their enthusiastic support beyond our
wildest dreams, we say thank you.

Table of Contents
Introduction
Part I
Chapter One
Chapter Two
Chapter Three
Chapter Four
Chapter Five
Chapter Six
Part II
Chapter Seven
Chapter Eight
Chapter Nine
Part III
Chapter Ten
Chapter Eleven
Chapter Twelve
Chapter Thirteen
Chapter Fourteen
Chapter Fifteen
Chapter Sixteen
Chapter Seventeen
Chapter Eighteen
Appendix
Which Quadrant Are You In?
Is It The Right One For You? 1
The CASHFLOW Quadrant
"Why Don't You Get A Job?" 7
Different Quadrants... Different People 17
Why People Choose Security Over Freedom . 47
3 Kinds Of Business Systems 69
The 7 Levels Of Investors 81
You Cannot See Money With Your Eyes 97
Bringing Out The Best In You
Becoming Who You Are 123
How Do I Get Rich? 137
Be The Bank... Not The Banker 155
How To Be A Successful "B" and "I"
Take Baby Steps 183
THE 7 STEPS 70 FADING
YOUR FEVANCIAL FAST TRACK
Step 1: It's Time To Mind Your Own Business . 199
Step 2: Take Control Of Your Cash Flow 203
Step 3: Know The Difference Between
Risk And Risky 211
Step 4: Decide What Kind Of Investor
You Want To Be 215
Step 5: Seek Mentors 223
Step 6: Make Disappointment Your Strength . . 231
Step 7: The Power Of Faith 237
In Summary 243
The Quick Reference Guide to Wealth 246
INTRODUCTION
Which Quadrant
Are You In? Is It The
Right One For You?
Are you financially free? The CASIFFLOW Quadrant was written for you if your life
has come to a financial fork in the road. If you want to take control of what you
do today in order to change your financial destiny it will help you chart your
course. This is the C'ASHFLOW Quadrant:
The letters in each
quadrant represent:
E for employee
S for self-employed
B for business owner
I for investor
Each of us resides in at least one of the four quadrants of the CASHFLOW
Quadrant. Where we are is determined by where our cash comes from. Many of
us rely on paychecks and are therefore employees, while others are self-employed.
Employees and self-employed individuals reside on the left side of the CASHFLOW
Quadrant. The right side of the CASHFLOW Quadrant is for individuals who
receive their cash from businesses they own or investments they own.
The CASHFLOW Quadrant is about the four different types of people who
make up the world of business, who they are and what makes individuals in each
quadrant unique. It will help you define where you are in the Quadrant today
and help you chart a course for where you want to be in the future as you choose
your own path to financial freedom. While financial freedom can be found in all
four of the quadrants, the skills of a "B" or "I" will help you reach your
financial
goals more quiddy. A successful "E" should also become a successful "I".
WHAT DO YOU WANT 70 BE WHEN YOU GROW UP?
This book is in many ways Part II of my book, Rich Dad Poor Dad For those
of you who may not have read Rich Dad Poor Dad, it was about the different
lessons my two dads taught me about the subject of money and life choices. One
was my real dad and the other my best friend's dad. One was highly educated and
the other a high school drop out. One was poor and the other rich.
Whenever I was asked the question, "What do you want to be when you grow
up?"
My highly educated but poor dad always recommended,
"Go to school, get good grades, and then find a safe secure job."
He was recommending a life's path that looked like this.
SCHOOL
2
Poor Dad's Advice
Poor dad was recommending that I choose to become either a high paid "E",
employee, or a high paid *S", self employed professional, such as a medical doctor,
lawyer, or accountant. My poor dad was very concerned about a steady paycheck,
benefits, and job security. That is why he was a high paid government official; the
head of education for the State of Hawaii.
My rich, but uneducated dad, on the other hand, offered very different advice.
He recommended,
"Go to school, graduate, build businesses and become a successful investor."
He was recommending a life's path that looked like this.
Ricb Dad's Advice
SCHOOL
This book is about the mental, emotional, and educational process I went
through in following my rich dad's advice.
WHO THIS BOOK IS FOR
This book is written for people who are ready to change quadrants. This
book is especially for individuals who are currently in the "E" and "S" categories
and are contemplating becoming %'s" or "I's". It is for people who are ready to
move beyond job security and begin to achieve financial security. It is not an easy
life's path but the prize at the end of the journey is worth the journey. It is the
journey to financial freedom.
Rich dad told me a simple story when I was 12 years old that has guided me
to great wealth and financial freedom. It was rich dad's way of explaining the
difference between the left side of the CASHFLOW Quadrant, the "E" and "S"
3
quadrants, from the right side or the and "I" quadrants. It goes:
"Once upon a time there was this quaint little village. It was a great place to
live except for one problem. The village had no water unless it rained. To solve
this problem once and for all, the village elders decided to put out to bid the
contract to have water delivered to the village on a daily basis. Two people
volunteered to take on the task and the elders awarded the contract to both of
them. They felt that a little competition would keep prices low and insure a back
up supply of water.
The first of the two people who won the contract, Ed, immediately ran out,
bought two galvanized steel buckets and began running back and forth along the
trail to the lake which was a mile away. He immediately began making money as
he labored morning to dusk hauling water from the lake with his two buckets. He
would empty them into the large concrete holding tank the village had built. Each
morning he had to get up before the rest of the village awoke to make sure there
was enough water for the village when it wanted it. It was hard work, but he was
very happy to be making money and for having one of the two exdusive contracts
for this business.
The second winning contractor, Bill, disappeared for a while. He was not seen
for months, which made Ed very happy since he had no competition. Ed was
making all the money.
Instead of buying two buckets to compete with Ed, Bill had written a business
plan, created a corporation, found four investors, employed a president to do the
work, and returned six months later with a construction crew. Within a year his
team had built a large volume stainless steel pipeline which connected the village
to the lake.
At the grand opening celebration, Bill announced that his water was cleaner
than Ed's water. Bill knew that there had been complaints about dirt in Ed's water.
Bill also announced that he could supply the village with water 24 hours a day, 7
days a week. Ed could only deliver water on the weekdays...he did not work on
weekends. Then Bill announced that he would charge 75% less than Ed did for this
higher quality and more reliable source of water. The village cheered and ran
immediately for the faucet at the end of Bill's pipeline.
In order to compete, Ed immediately lowered his rates by 75%, bought two
more buckets, added covers to his buckets and began hauling four buckets each
trip. In order to provide better service, he hired his two sons to give him a hand
for the night shift and on weekends. When his boys went off to college, he said to
them,
'Huny back because someday this business will belong to you.'
4
For some reason, after college, his two sons never returned. Eventually Ed
had employees and union problems. The union was demanding higher wages,
heifer benefits, and wanted its members to only haul one bucket at a time.
Bill, on the other hand, realized that if this village needed water then other
villages must need water too. He rewrote his business plan and went off to sell his
high speed, high volume, low cost, and clean water delivery system to villages
throughout the world. He only makes a penny per bucket of water delivered, but
he delivers billions of buckets of water everyday. Regardless if he works or not,
billions of people consume billions of buckets of water, and all that money pours
into his bank account. Bill had developed a pipeline to deliver money to himself as
well as water to the villages.
Bill lived happily ever after and Ed worked hard for the rest of his life and had
financial problems forever after. The end."
That story about Bill and Ed has guided me for years. It has assisted me in my
life's decision making process. I often ask myself,
"Am I building a pipeline or hauling buckets?"
"Am I working hard or am I working smart?"
And the answers to those questions have made me financially free.
And that is what this book is about. It is about what it takes to become a "B"
and an "I". It is for people who are tired of hauling buckets and are ready to
build
pipelines for cash to flow into their pockets... not out of their pockets.
This book is divided into three parts.
Part One: The first part of this book is about the core differences between
people in the four quadrants. It is about why certain people gravitate to certain
quadrants and often get stuck there without realizing it. It will help you identify
where you are today in the Quadrant and where you want to be in five years.
Part Two: The second part of this book is about personal change. It is more
about "who" you have to be instead of what you have to do.
Part Three: The third part of this book defines seven steps you can take on
your path to the right side of the Quadrant. I will share more of my rich dad's
secrets on the skills required to be a successful "B° and T. It will help you
choose
your own path to financial freedom.
Throughout The CASHFZOW Quadrant I continue to stress the importance of
financial intelligence. If you want to operate on the right side of the quadrant,
the
"B" and "1" side, a person needs to be smarter than if you choose to stay on the
left
side as an or "S".
To be a "B" or T, you must be able to control the direction your cash flow is
5
flowing. This book is written for people who are ready to make changes in their
lives. It is written for people who are ready to move beyond job security and
begin to build their own pipelines to achieve financial freedom.
We are in the dawning of the Information Age and this age will offer more
opportunities than ever before for financial rewardd. It will be individuals with
the skills of the "B's" and "Ps" who will be able to identify and seize those
opportunities. To be successful in the Information Age, a person will need
information from all four quadrants. Unfortunately, our schools are still in the
Industrial Age and still prepare students for only the left side of the Quadrant.
If you are looking for new answers to move forward into the Information Age,
then this book is written for you. It is written to assist you in your journey into
the
Information Age. It does not have all the answers...but it will share the deep
personal and guiding insights I gained as I traveled from the "E" and 'S" side of
the
CASIIFLOW Quadran4 to the "B' and 'I" side.
If you are ready to begin your journey or are already on your journey to
financial freedom this book is written for you.
As my way of saying 'Thank You' for reading this book and increasing your knowledge
about
money and business, I make available to you a special audio report entitled,
What My Rich Dad Taught
Me About Investing."
It is an educational tape that offers further insights into what my rich dad taught
me about
investing. It is offered to further enhance your education and explain why we
create our educational
products for people like you. With a retail value of $19.95 we offer this tape as a
gift to you.
This tape does not discuss what I call 'Middle Class* investment strategies...
especially those
heavily dependent upon mutual funds. In fact you will find out why many rich people
don't buy
mutual funds. As with all our products, we do our best to provide distinctions
between how the rich,
the poor, and the middle class think... and then leave the choice up to you as to
which way you
want to think. After all, one of the benefits of living in a free society is that
we all have the choice to
be rich, poor, or middle class. That decision is up to you, regardless of which
class you are in today.
All you have to do to get this audio report is visk our special webs& at
www.richdadbook2.com and the report is pouts free.
Thank you
6
CHAPTER ONE
"Why Don't You
Get A Job?"
I
n 1985, my wife, Kim, and I were homeless. We were unemployed and
had little money left from our savings; our credit cards were exhausted;
and we lived in an old brown Toyota with reclining seats that served as
beds. At the end of one week, the harsh reality of who we were, what we
were doing, and where we were headed began to sink in.
Our homelessness lasted for another two weeks. A friend, when she realized
our desperate financial situation, offered us a room in her basement. We lived
there for nine months.
We kept our situation quiet. For the most part, my wife and I looked quite
normal on the surface. When friends and family were informed of our plight, the
first question was always, "Why don't you get a job?"
At first we attempted to explain, but in most instances, we failed to clarify our
reasons. To someone who values a job, it is difficult to explain why you might not
want a job.
Occasionally, we did a few odd jobs and earned a few dollars here and there.
But we did that only to keep food in our stomachs and gas in the car. Those few
extra dollars were only fuel to keep us going toward our singular goal. I must
admit
that during moments of deep personal doubt, the idea of a safe, secure job with a
paycheck was appealing. But because job security was not what we were looking
for, we kept pushing on, living day to day, on the brink of the financial abyss.
7
That year, 1985, was the worst of our lives, as well as one of the longest.
Anyone who says that money isn't important obviously has not been without it for
long. Kim and I fought and argued often. Fear, uncertainty and hunger shortens the
human emotional fuse, and often we fight with the person who loves us the most.
Yet, love held the two of us together and our bond as a couple grew stronger
because of the adversity. We knew where we were going; we just did not know if
we would ever get there.
We knew we could always find a safe, secure, high-paying job. Both of us
were college graduates with good job skills and solid work ethics. But we were
not going for job security. We were going for financial freedom.
By 1989, we were millionaires. Although financially successful in some
people's eyes, we still had not reached our dreams. We had not yet achieved true
financial freedom. That took until 1994. By then, we never had to work again for
the rest of our lives. Barring any unforeseen financial disaster, we were both
financially free. Kim was 37, and I was 47.
IT DOESN'T TAKE MONEY ID MAKE MONEY
I started this book about being homeless and having nothing because I often
hear people say, "It takes money to make money."
I disagree. To get from homeless in 1985 to rich in 1989 and then to become
financially free by 1994 did not take money. We had no money when we started,
and we were in debt.
It also does not take a good formal education. I have a college degree, and I
can honestly say that achieving financial freedom had nothing to do with what I
learned in college. I did not find much call for my years of studying calculus,
spherical trigonometry, chemistry, physics, French, and English literature.
Many successful people have left school without receiving a college degree.
People such as Thomas Edison, founder of General Electric; Henry Ford, founder
of Ford Motor Co.; Bill Gates, founder of Microsoft; Ted 'ffirner, founder of CNN;
Michael Dell, founder of Dell Computers; Steve Jobs, founder of Apple Computer;
and Ralph Lauren, founder of Polo. A college education is important for traditional
professions, but not for how these people found great wealth. They developed
their own successful businesses and that was what Kim and I were striving for.
SO WHAT DOES IT TAKE?
I am often asked, "If it doesn't take money to make money, and schools do
not teach you how to become financially free, then what does it take?
My answer: It takes a dream, a lot of determination, a willingness to learn
8
quickly, and the ability to use your God-given assets properly and to know which
sector of the CASHFLOW Quadrant to generate your income from.
WHAT IS THE CASHFLOW QUADRANT?
The diagram below is the CASHFLOW Quadrant.
The letters in each
quadrant represent:
E for employee
S for self-employed
B for business owner
I for investor
WHICH QUADRANT DO YOU GENERATE YOUR
INCOME FROM?
The CASHFLOW Quadrant represents the different methods by which income
or money is generated. For example, an employee earns money by holding a job
and working for someone else or a company. Self-employed people earn money
working for themselves. A business owner owns a business that generates money,
and investors earn money from their various investments-in other words, money
generating more money.
Different methods of income generation require different frames of mind,
different technical skills, different educational paths, and different types of
people.
Different people are attracted to different quadrants.
While money is all the same, the way it is earned can be vastly different. If
you begin to look at the four different labels for each quadrant, you might want to
ask yourself, "Which quadrant do you generate the majority of your income from?"
Each quadrant is different. To generate income from different quadrants
requires different skills and a different personality, even if the person found in
9
each quadrant is the same. Changing from quadrant to quadrant is like playing golf
in the morning and then attending the ballet at night.
YOU CAN EARN INCOME IN ALL FOUR QUADRANTS
Most of us have the potential to generate Income from all four quadrants.
Which quadrant you or I choose to earn our primary income from is not so much
what we learned in school; it is more about who we are at the core-our core
values, strengths, weaknesses and interests. It is these core differences that
attract
us to or repel us from the four quadrants.
Yet, regardless of what we "do" professionally, we can still work in all four
quadrants. For example, a medical doctor could choose to earn income as an "E,"
an employee, and 'pin the staff of a large hospital, or work for the government in
the public-health service, or become a military doctor, or join the staff of an
insurance company needing a doctor on its staff.
This same doctor could also decide to earn income as an "S," a self-employed
person, and start a private practice, setting up an office, hiring staff and
building a
private list of clients.
Or the doctor could decide to become a "B" and own t clinic or laboratory
and have other doctors on staff. This doctor probably would hire a business
manager to run the organization. In this case, the doctor would own the business,
but not have to work in it. The doctor also could decide to own a business that
has nothing to do with the medical field, while still practicing medicine somewhere
else. In this case, the doctor would be earning income as both an "E" and as a "B."
As an 1," the doctor also could generate income from being an investor in
someone else's business or in vehicles like the stock market, bond market and real
estate.
The important words are "generate income from." It is not so much what we
do, but more how we generate income.
DIFFERENT METHODS OF INCOME GENERATION
More than anything, it is the internal differences of our core values, strengths,
weaknesses and interests that affect which quadrant we decide to generate our
income from. Some people love being employees, while others hate it. Some
people love owning companies, but do not want to run them. Others love owning
companies and also love running them. Certain people love investing, while others
only see the risk of losing money. Most of us are a little of each of these
characters. Being successful in the four quadrants often means redirecting some
internal core values.
10
YOU CAN BE RICH OR POOR IN ALL
FOUR QUADRANTS
It also is important to note that you can be rich or poor in all four quadrants.
There are people who earn millions and people who go bankrupt in each of the
quadrants. Being in one quadrant or the other does not necessarily guarantee
financial success.
NOT ALL QUADRANTS ARE EQUAL
By knowing the different features of each quadrant, you'll have a better idea
as to which quadrant, or quadrants, might be best for you.
For example, one of the many reasons I chose to work predominantly in the
"B" and .r quadrants is because of tax advantages. For most people working on
the left side of the Quadrant, there are few legal tax breaks available. Yet, legal
tax
breaks abound on the right side of the Quadrant By working to generate income
in the "B" and "I" quadrants, I could acquire money faster and keep that money
working for me longer, without losing large chunks to pay taxes.
DIFFERENT WAYS OF EARNING MONEY
When people ask why Kim and I were homeless, I tell them it was because of
what my rich dad taught me about money. For me, money is important, yet I did
not want to spend my life working for it That is why I did not want a job. If we
were going to be responsible citizens, Kim and I wanted to have our money work
for us rather than spend our lives physically working for money.
That is why the CASHFLOW Quadrant is important. It distinguishes between
the different ways in which money is generated. There are ways of being
responsible and creating money, other than physically working for it.
DIFFERENT FATHERS-DIFFERENT IDEAS
ABOUT MONEY
My highly educated dad had a strong belief that the love of money was evil.
That to profit excessively meant you were greedy. He felt embarrassed when the
newspapers published how much he made, because he felt he was too highly paid
when compared with the schoolteachers who worked for him. He was a good,
honest, hard working man who did his best to defend his point of view that
money was not important to his life.
My highly educated, yet poor, dad constantly said,
"I'm not that interested in money."
11
"I'll never be rich."
"I can't afford it."
"Investing is risky."
"Money isn't everything."
MONEY SUPPORTS LIFE
My rich dad had a different point of view. He thought it foolish to spend your
life working for money and to pretend that money was not important. Rich dad
believed that life was more important than money, but money was important for
supporting life. He often said, "You only have so many hours in a day and you can
only work so hard. So why work hard for money? Learn to have money and
people work hard for you, and you can be free to do the things that are
important."
To my rich dad, what was Important was:
1. Having lots of time to raise his kids.
2. Having money to donate to charities and projects he supported.
3. Bringing jobs and financial stability to the community.
4. Having time and money to take care of his health.
5. Being able to travel the world with his family.
"Those things take money," said rich dad. "That is why money is important to
me. Money is important, but I don't want to spend my life working for it."
CHOOSING THE QUADRANT S
One reason my wife and I focused on the "B" and "I" quadrants while we
were homeless was because I had more training and education in those quadrants.
It was because of my rich dad's guidance that I knew the different financial and
professional advantages of each quadrant. For me, the quadrants of the right side,
the "B" and T quadrants, offered the best opportunity for financial success and
financial freedom.
Also, at 37 years old, I had experienced successes and failures in all four
quadrants, which allowed me some degree of understanding about my own
personal temperament, likes, dislikes, strengths and weaknesses. I knew which
quadrants I did best in.
PARENTS AIM TEACHERS
It was my rich dad who often referred to the CASIELOW Quadrant when I
12
was a young boy. He would explain to me the difference between someone who
was successful on the left side vs. the right side. Yet being young, I really did
not
pay much attention to what he said. I did not understand the difference between
an employee's mind-set and a business owner's mind-set. I was just trying to
survive in school.
Yet, I did hear his words, and soon his words began to make sense. Having
two
dynamic and successful father figures around me gave meaning to what each
was saying. But it was what they were doing that allowed me to begin to notice
the differences between the "E-S" side of the Quadrant and the MB-I" side. At first
the differences were subtle, and then they became glaring.
For example, one painful lesson I experienced as a young boy was simply
how much time one dad had available to spend with me vs. the other. As the
success and prominence of both dads grew, it was obvious that one dad had less
and less time to spend with his wife and four children. My real dad was always on
the road, at meetings, or dashing off to the airport for more meetings. The more
successful he got, the fewer dinners we had together as a family. Weekends, he
spent at home in his crowded little office, buried under paperwork.
My rich dad, on the other hand, had more and more free time as his success
grew. One of the reasons I learned so much about money, finance, business and
life was simply because my rich dad had more and more free time for his children
and me.
Another example is that both dads made more and more money as they
became successful, but my real dad, the educated one, also got further into debt.
So he'd work harder and suddenly find himself in a higher income-tax bracket. His
banker and accountant would then tell him to buy a bigger house for the so-called
"tax break." My dad would follow the advice and buy a bigger house, and soon he
was working harder than ever so he could make more money to pay for the new
house... taking him even further away from his family.
My rich dad was different. He made more and more money, but paid less in
taxes. He, too, had bankers and accountants, but he was not getting the same
advice my highly educated dad was getting.
THE MAIN REASON
Yet, the driving force that would not allow me to stay on the left side of the
Quadrant was what happened to my highly educated but poor dad at the peak of
his career.
In the early 1970s, I was already out of college and in Pensacola, Florida,
going through pilot training for the Marine Corps, on my way to Vietnam. My
13
educated dad was now the Superintendent of Education for the State of Hawaii
and a member of the governor's staff. One evening, my dad phoned me in my
mom on base.
"Son," he said. "I'm going to resign from my job and run for lieutenant
governor of the state of Hawaii for the Republican Party."
I gulped and then said, "You're going to run for office against your boss?"
"'That's right," he replied.
"Why?" I asked. "Republicans do not have a chance in Hawaii. The Democratic
Party and the labor unions are too strong."
"I know, son. I also know that we do not have a prayer of winning. Judge
Samuel King will be the candidate for governor, and I will be his running mate."
"Why?" I asked again. "Why run against your boss if you know you're going to
lose?"
"Because my conscience won't let me do anything else. The games these
politicians are playing disturb me."
"Are you saying they're corrupt?" I asked.
"I don't want to say that," said my real dad. He was an honest and moral man
who rarely spoke badly about anyone. He was always a diplomat. Yet, I could tell
from his voice that he was angry and upset when he said, "I'll just say that my
conscience bothers me when I see what goes on behind the scenes. I could not
live with myself if I turned a blind eye and did nothing. My job and paycheck are
not as important as my conscience."
After a long silence, I realized that my dad's mind was made up. "Good luck,"
I said quietly. "I'm proud of you for your courage, and I'm proud to be your son."
My dad and the Republican ticket were crushed, as expected. The re-elected
governor sent the word out that my dad was never to get a job again with the
government for the state of Hawaii... and he never did. At the age of 54, my dad
went looking for a job, and I was on my way to Vietnam.
At middle age my dad was looking for a new job. He went from jobs with big
titles and low pay to more jobs with big titles and low pay. Jobs where he was the
executive director of XYZ Services, a nonprofit organization, or managing director
of ABC Services, another nonprofit.
He was a tall, brilliant and dynamic man who was no longer welcome in the
only world he knew, the world of government employees. He tried starting several
small businesses. He was a consultant for a while, and even bought a famous
franchise, but they all failed. As he grew older, and his strength slipped away, so
did his drive to start over again; his lack of will became even more pronounced
after each business failure. He was a successful "E" trying to survive as an "S," a
14
quadrant in which he had no training or experience and for which he had no
heart. He loved the world of public education, but he could not find a way to get
back in. The ban on his employment in the state government was silently in place.
In some circles, the word is called "blacklisted."
If not for Social Security and Medicare, the last years of his life would have
been a complete disaster. He died frustrated and a little angry, yet he died with a
dear conscience.
So what kept me going in the darkest of hours? It was the haunting memory of
my educated dad sitting at home, waiting for the phone to ring, trying to succeed
in the world of business, a world he knew nothing about.
That, and the joyous memory of seeing my rich dad grow happier and more
successful as his years went on inspired me. Instead of declining at age 54, rich
dad blossomed. He had become rich years before that, but now he was becoming
mega-rich. He was constantly in the newspapers as the man who was buying up
Waikiki and Maui. His years of methodically building businesses and investing was
paying off, and he was on his way to becoming one of the richest men in the
Islands.
SMALL DIFFERENCES BECOME
LARGE DIFFERENCES
Because my rich dad had explained the Quadrant to me, I was better able to
See the small differences that grew into large differences when measured over the
years a person spends working. Because of the Quadrant, I knew it was better to
decide not so much what I wanted to do, but more who I wanted to become as
my working years progressed. In the darkest hours, it was this deep knowledge,
and lessons from two powerful dads, that kept me going.
IT IS MORE THAN THE QUADRANT
The C4,513710W Quadrant is more than two lines and some letters.
15
If you look below the surface of this simple diagram, you will find completely
different worlds as well as different ways of looking at the world. As a person who
has looked at the world from both the left side of the Quadrant and the right side,
I can honestly say the world looks much different depending on which side you
are on... and those differences are what this book is about.
One quadrant is not better than another... each has strengths, and each has
weaknesses. This book is written to allow you to glimpse into the different
quadrants, and into the personal development required to be financially successful
in each of them. It is my hope that you will gain further insights into choosing
the
financial life path that is best suited for you.
Many of the skills essential to be successful on the right side of the Quadrant
are not taught in school, which might explain why people like Bill Gates of
Microsoft, and Ted Turner of CNN, and Thomas Edison left school early. This book
will identify the skills, as well as the personal core temperament, that are
necessary
to find success on the "B" and ur side of the Quadrant
First, I offer a broad overview of the four quadrants and then a closer focus on
the "B" and "I" side. There are already plenty of books written about what it takes
to be successful on the "E" and "S" side.
After reading this book, some of you might want to make a change in how
you earn your income, and some of you will be happy to stay just where you are.
You might choose to operate in more than one quadrant, and maybe in all four
quadrants. We are all diffetent, and one quadrant is not more important or better
than another. In every village, town, city and nation in the world, there is a need
for people operating in all four quadrants to ensure the financial stability of the
community.
Also, as we grow older and gain different experiences, our interests change.
For example, I notice that many young people right out of school are often happy
to get a job. Yet, after a couple of years, a few of them decide they are not
interested in climbing the corporate ladder, or they lose interest in the field of
business they are in. These changes of age and experience often cause a person to
search for new avenues of growth, challenge, financial reward and personal
happiness. I hope this book offers some fresh ideas for attaining those goals.
In short, this book is not about homelessness but about finding a home... a
home in a quadrant or quadrants.
16
CHAPTER 2
Different
Quadrants...
Different People
y
ou can't teach an old dog new tricks," my highly educated dad
always said.
I had sat with him on several occasions, doing my best to explain the
CASHFLOW Quadrant in an effort to show him some new financial directions.
Nearing 60 years of age, he was realizing that many of his dreams were not going
to be fulfilled. His "blacklisting" seemed to go beyond the walls of the state
government. He was now "blacklisting" himself.
"I tried it, but it didn't work," he said.
My dad was referring to his attempts to be successful in the "S" quadrant with
his own business as a self-employed consultant, and as a "ii" when he poured
much of his life savings into a famous ice-cream franchise that failed.
Being bright, he conceptually understood the different technical skills required
in each of the four quadrants. He knew he could learn them if he wanted to. But
there was something else holding him back.
One day over lunch, I talked to my rich dad about my educated dad.
"Your father and I are not the same people at the core," said rich dad. -While
17
we are both human beings, and we both have fears, doubts, beliefs, strengths and
weaknesses, we respond or handle those core similarities... differently."
"Can you tell me the differences?" I asked.
"Not over one lunch," said rich dad. "But how we respond to those differences
is what causes us to remain in one quadrant or another. When your dad tried to
cross over from the T' quadrant to the 'B' quadrant, intellectually he could
understand the process, but he couldn't handle it emotionally. When things did not
go smoothly, and he began to lose money, he did not know what to do to solve
the problems... so he went back to the quadrant he felt most comfortable in."
"The `E' and sometimes 'S' quadrant," I said.
Rich dad nodded his head. "When the fear of losing money and failing
becomes too painful inside, a fear we both have, he chooses to seek security, and
I choose to seek freedom?
"And that is the core difference," I said, signaling the waiter for our check
"Even though we're all human beings," restated rich dad, "when it comes to
money and the emotions attached to money, we all respond differently. And it's
how we respond to those emotions that often determines which quadrant we
choose to generate our income from."
"Different quadrants... different people," I said
l'hat's right," said rich dad as we stood and headed for the door. "And if
you're going to be successful in any quadrant, you need to know more than just
technical skills. You also need to know the core differences that cause people to
seek different quadrants. Know that, and life will be much easier?
We were shaking hands and saying goodbye as the valet brought my rich
dad's car around.
"Oh, one last thing," I said hurriedly. "Can my dad changer
"Oh sure," said rich dad. "Anyone can change. But changing quadrants is not
like changing jobs or changing professions. Changing quadrants is often a change
at the core of who you are, how you think, and how you look at the world. The
change is easier for some people than for others simply because some people
welcome change and others fight it. And changing quadrants is most often a
life-changing experience. It is a change as profound as the age-old story of the
caterpillar becoming a butterfly. Not only will you change but so will your
friends.
While you'll still be friends with your old friends, it's just harder for
caterpillars to
do the same things butterflies do. So the changes are big changes, and not too
many people choose to make them."
The valet closed the door, and as my rich dad drove off, I was left thinking
about the differences.
18
WHAT ARE THE DIFFERENCES?
How do I tell if people are an "E, S, B or I" without knowing much about
them? One of the ways is by listening to their words.
One of my rich dad's greatest skills was being able to "read" people, but he
also believed you could not "judge a book by its cover." Rich dad, like Henry Ford,
did not have an excellent education, but both men knew how to hire and work
with people who did. Rich dad always explained to me that the ability to bring
smart people together and work as a team was one of his primary skills.
From the age of 9, my rich dad began to teach me the skills necessary to be
successful in the "B" and "I" quadrants. One of those skills was to get beyond the
surface of a person and begin to gaze into their core. Rich dad used to say, "If I
listen to a person's words, I begin to see and feel their souls."
So at the age of 9, I began to sit in with my rich dad when he hired people.
From these interviews I learned to listen not so much for words but for core
values. Values that my rich dad said came from their souls.
"E" QUADRANT WORDS
A person who comes from the "E," or employee, quadrant might say:
"I am looking for a safe, secure job with good pay and excellent benefits'
"S QUADRANT WORDS
A person who comes from the "S," or self-employed, quadrant might say:
"My rate is $35 per hour."
Or "My normal commission rate is 6 percent of the total price."
Or "I can't seem to find people who want to work and do the job right."
Or "I've got more than 20 hours into this project."
"B" QUADRANT WORDS
A person operating out of the "B," or business-owner, quadrant might say:
"I'm looking for a new president to run my company."
"I" QUADRANT WORDS
Someone operating out of the "I," or investor, quadrant might say:
"Is my cash flow based on an internal rate of return or net rate of return.?"
WORDS ARE IDOLS
Once my rich dad knew who the person he was interviewing was at the core,
at least for that moment, he would know what they were really looking for, what
19
he had to offer, and what words to use when speaking to them. Rich dad always
said, Words are powerful tools."
Rich dad constantly reminded his son and me of this. "If you want to be a
leader of people, then you need to be a master of words."
So one of the skills necessary to be a great "B" is to be a master of words,
knowing which words work on which kinds of people. He trained us to first listen
carefully to the words a person used, and then we would know which words we
should use, and when to use them in order to respond to them in the most
effective way.
Rich dad explained, "One word may excite one type of person while that same
word would completely turn off another person."
For example, the word "risk" might be exciting to a person in the "I" quadrant,
while evoking total fear to someone in the "E" quadrant.
To be great leaders, rich dad stressed that we lust had to be great listeners. If
you did not listen to the words a person used, you would not be able to feel their
soul. If you did not listen to their soul, you would never know to whom you were
talking.
CORE DIFFERENCE'S
The reason he would say, "Hear their words, feel their souls," is because
behind the words a person chooses are the core values and core differences of that
individual. The following are some of the generalities that separate people in one
quadrant from those in another.
I. The °E" (employee). When I hear the word "secure" or "benefits," I get a
sense of who they might be at the core. The word "secure" is a word often
used in response to the emotion of fear. If a person feels fear, then the need
for security is often a commonly used phrase for someone who comes
predominantly from the "E" quadrant. When it comes to money and jobs,
there are many people who simply hate the feeling of fear that comes with
economic uncertainty... hence the desire for security.
The word "benefit" means people would also like some kind of additional
reward that is spelled out— a defined and assured extra compensation, such
20
as a health-care or retirement plan. The key is that they want to feel secure
and see it in writing. Uncertainty does not make them happy; certainty does.
Their internal workings say, "I'll give you this... and you promise to give me
that in return."
They want their fear satisfied with some degree of certainty, so they seek
security and strong agreements when it comes to employment. They are
accurate when they say, "I'm not that interested in money."
For them, the idea of security is often more important than money.
Employees can be presidents of companies or janitors of companies. It is
not so much what they do, but the contractual agreement they have with
the person or organization that hires them.
g s\
2 The `5" (seffemployed). These are people who want to: "Be their own
boss." Or they like to: "Do their own thing."
I call this group the "do-it-yourselfers."
Often, when it comes to the subject of money, a hard core "S" does not like
to have his or her income be dependent on other people. In other words, if
"S's" work hard, they expect to get paid for their work. Those who are "S's"
do not like having the amount of money they earn dictated by someone
else or by a group of people who might not work as hard as they do. If
they work hard, pay them well. They also understand that if they do not
work hard, then they don't deserve to be paid much. When it comes to
money, they have fiercely independent souls.
THE EMOTION OF FEAR
So while the "E," or employee, often will respond to the fear of not having
money by seeking "security," the "S" often will respond differently. The
people in this quadrant respond to fear not by seeking security, but by
taking control of the situation and doing it on their own. That is why I call
21
the "S" group the "do-it-yourself' group. When it comes to fear and financial
risk, they want to "take the bull by the horns?
In this group you find well-educated "professionals" who spend years in
school, such as doctors, lawyers and dentists.
Also in the "S° group are people who took educational paths other than, or
in addition to, traditional school. In this group are direct-commission
salespeople- real estate agents, for instance- as well as small business
owners such as retail shopkeepers, cleaners, restaurateurs, consultants,
therapists, travel agents, car mechanics, plumbers, carpenters, preachers,
electricians, hair stylists, and artists.
This group's favorite song would be either "Nobody Does It Better," or "I
Did It My Way."
Self-employed people are often hard-core "perfectionists." They often want
to do something exceptionally well. In their mind, they do not think anyone
else does it better than they can do it, so they really do not trust anyone
else to do it the way they like it... the way they think is the "right way? In
many respects, they are true artists with their own style and methods of
doing things.
And that is why we hire them. If you hire a brain surgeon, you want that
brain surgeon to have had years of training and experience, but most
importantly, you want this brain surgeon to be a perfectionist The same
goes for a dentist, hairstylist, marketing consultant, plumber, electrician,
tarot-card reader, lawyer or a corporate trainer. You, as the client hiring this
person, want someone who is the best.
For this group, money is not the most important thing about their work.
Their independence, the freedom to do things their way, and to be
respected as experts in their field, are much more important than mere
money. When hiring them, it is best to tell them what you want done and
then leave them alone to do it. They do not need or want supervision. If
you meddle too much, they'll simply walk off the job and tell you to hire
someone else. The money really does not come first; their independence
does.
22
This group often has a hard time hiring other people to do what they do
simply because in their mind, nobody is up to the task. Which causes this
group to often say: "It's hard to find good help these days."
Also, if this group trains someone to do what they do, that newly trained
person often ends up leaving to "do their own thing," and "be their own
boss," and "do things their way," and "to have a chance to express their
individuality."
Many "S" types are hesitant to hire and train other people because once
trained they often end up as their competition. This, in turn, keeps them
working harder and doing things on their own.
3. The V" (business owner). This group of people could almost be the
opposite of the "S." Those who are true "B's" like to surround themselves
with smart people from all four categories, "E, S, B and I." Unlike the "S,"
who does not like to delegate work (because no one could do it better), the
true "B" likes to delegate. The true motto of a "B" is, "Why do it yourself
when you can hire someone to do it for you, and they can do it better?"
Henry Ford fit this mold. As one popular story goes, a group of so-called
intellectuals came by to condemn Ford for being "ignorant." They daimed
he really did not know much. So Ford invited them into his office and
challenged them to ask him any question and he would answer it. So this
panel assembled around America's most powerful industrialist, and began to
ask him questions. Ford listened to their questions, and when they were
through, he simply reached for several phones on his desk and called in
some of his bright assistants, and asked them to give the panel the answers
they sought. He ended by informing the panel that he would rather hire
smart people who went to school to come up with answers so he could
leave his mind clear to do more important tasks. Tasks like "thinking."
One of the quotes credited to Ford goes: "Thinking is the hardest work
there is. That is why so few people engage in it."
23
LEADERSHIP IS BRINGING OUT THE
BEST IN PEOPLE
My rich dad's idol was Henry Ford. He had me read books about people
like Ford and John D. Rockefeller, the founder of Standard Oil. Rich dad
constantly encouraged his son and me to learn the essence of leadership
and the technical skills of business. In retrospect, I understand now that
many people may have one or the other, but to be a successful "B," you
really do need to have both. I also now realize that both skills can be
learned. There is a science to business and leadership as well as an art to
business and leadership. For me, both are lifelong studies.
When I was a boy my rich dad gave me a children's book entitled Stone
Soup, written in 1947 by Marcia Brown and still available today from leading
bookstores. He had me read this book to begin my training as a leader in
business.
Leadership, rich dad said, is "the ability to bring out the best in people." So
he trained his son and me in the technical skills necessary to become
successful in business, technical skills such as reading financial statements,
marketing, sales, accounting, management, production and negotiations, and
he really stressed that we learn to work with and lead people. Rich dad
always said, "The technical skills of business are easy. . .the hard part is
working with people."
As a reminder, I still read Stone Soup today, for I personally have a tendency
to be a tyrant, instead of a leader, when things do not go my way.
ENTREPRENEURL4L DEVELOPMENT
I have often heard the words, "I'm going to start my own business."
Many people tend to believe that the way to financial security and
happiness is to "do your own thing," or to "develop a new product no one
else has."
So they rush out and start their own business. In many cases, this is the path
they take.
24
Many wind up starting an "S" type of business and not a -B" type of
business. Again, not that one is necessarily better than the other. Both have
different strengths and weakness, risks and rewards. But many people who
want to start a "B" type of business wind up with an "S" type of business
and become stalled in their quest to move to the right side of the Quadrant.
Many new entrepreneurs want to do this:
25
But wind up instead doing this and getting stuck there.
But only a few who attempt actually make it. Why? Because the technical
skills and human skills to he successful in each quadrant are often different.
You must learn the skills and mind-set required by a quadrant in order to
find true success there.
26
THE DIFFERENCE BETWEEN AN NS'' TYPE OF BUSINESS
AND A "B. TYPE OF BUSINESS
Those who are true "B's" can leave their business for a year or more and
return to find their business more profitable and running better than when
they left it. In a true "S" type of business, if the "S" left for a year or more,
the chances are there would be no business left to return to.
So what causes the difference? Saying it simply, an "S" owns a job. A 93"
owns a system and then hires competent people to operate the system. Or
put another way: In many cases, the "S" is the system. That is why they
cannot leave.
Let's take a dentist. A dentist spends years in school learning to become a
self-contained system. You, as the client, get a toothache. You go see your
dentist. He fixes your tooth. You pay and go home. You're happy and then
tell all of your friends about your great dentist. In most cases, the dentist
can do the entire job by himself. The problem is that if the dentist goes on
vacation, so does his income.
"B" business owners can go on vacation forever because they own a system,
not a job. If the "B" is on vacation, the money still comes in.
To be successful as a "B" requires:
A. Ownership or control of systems, and
B. The ability to lead people.
For Ts. to evolve into "B's," they need to convert who they are and what
they know into a system... and many are not able to do that... or they are
often too attached to the system.
CAN YOU MAKE A BETTER HAMBURGER
THAN McDONALD'S?
Many people come to me for advice on how to start a company or to ask
me how to raise money for a new product or idea.
I listen, usually for about 10 minutes, and within that time I can tell where
their focus is. Is it the product or the system of business? In those 10
minutes, I most often hear words such as these (remember the importance
27
of being a good listener and allowing words to direct you to the core values
of a person's soul):
"This is a far better product than company XYZ makes."
"I've looked everywhere, and nobody has this product."
"I'll give you the idea for this product; all I want is 25 percent
of the profits."
I've been working on this (product, book, music score, invention) for years."
These are the words of a person generally operating from the left side of the
Quadrant, the "E" or "S" side.
It is important to be gentle at this time, because we are dealing with core
values and ideas that have been entrenched often for years... maybe
handed down for generations. If I am not gentle or patient, I could damage
a fragile and sensitive launch of an idea and, more importantly, a human
being ready to evolve into another quadrant.
THE HAMBURGER AND THE BUSINESS
Since I need to be gentle, at this point in the conversation I often use the
"McDonald's hamburger" example for darification. After listening to their
pitch, I slowly ask, "Can you personally make a better hamburger than
McDonald's?"
So far; 100 percent of the people I have talked with about their new idea or
product have said 'yes." They can all prepare, cook and serve a better
quality hamburger than McDonald's.
At this point, I ask them the next question: "Can you personally build a
better business system than McDonald's?"
Some people see the difference immediately, and some do not. And I would
say the difference is whether the person is fixated on the left side of the
Quadrant, which is focused on the idea of the better burger, or on the right
side of the Quadran4 which is focused on the system of business.
I do my best to explain that there are a lot of entrepreneurs out there
offering far superior products or services than are offered by the mega-rich
28
multinational corporations, just as there are billions of people who can
make a better burger than McDonald's. But only McDonald's has the system
that has served billions of burgers.
SEE THE OTHER SIDE
If people can begin to see the other side, I then suggest they go to
McDonald's, buy a burger, and sit and look at the system that delivered that
burger. Take note of the trucks that delivered the raw burger, the rancher
that raised the beef, the buyer who bought the beef, and the TV ads with
Ronald McDonald. Notice the training of young inexperienced people to say
the same words, "Hello, welcome to McDonald's," as well as the decor of
the franchise, the regional offices, the bakeries that bake the buns, and the
millions of pounds of French fries that taste exactly the same all over the
world. Then indude the stockbrokers raising money for McDonald's on Wall
Street. If they can begin to understand the "whole picture," then they have a
chance at moving to the "B" or "I" side of the Quadrant.
The reality is, there are unlimited new ideas, billions of people with services
or products to offer, millions of products, and only a few people who know
how to build excellent business systems.
Bill Gates of Microsoft did not build a great product. He bought somebody
else's product and built a powerful global system around it.
4. The (investor). Investors make money with money. They do not have
to work because their money is working for them.
The "I" quadrant is the playground of the rich. Regardless of which quadrant
people make their money in, if they hope someday to be rich, they
ultimately must come to the "I" quadrant. It is in the "I" quadrant that
money becomes converted to wealth.
29
THE CASHFLOW QUADRANT
That is the CASHFLOW Quadrant. The Quadrant simply makes distinctions on
how income is generated, whether as an "E" (employee), "S" (self-employed), "B"
(business owner) or ur (investor). The differences are summarized below.
You Have
A Job
You Own a System &
People Work for You

S fi
You Own
Money Works
a Job
for You
OPT AND OPM
Most of us have heard that the secrets to great riches and wealth are:
1. OPT-Other People's Time.
2. OPM-Other People's Money.
OPT and OPM are found on the right side of the Quadrant. For the most part,
people who work on the left side of the Quadrant are the OP (Other People)
whose time and money are being used.
A primary reason Kim and I took time to build a "B" type of business, rather
than an "S" type, was because we recognized the long-term benefit of using "other
people's time". One of the drawbacks to being a successful "S" is that success
simply means more hard work. In other words, good work results in more hard
work and longer hours.
In designing a "B" type of business, success simply means increasing the
system and hiring more people. In other words, you work less, earn more and
enjoy more free time.
The remainder of this book goes through the skills and mind-set required for
the right side of the Quadrant. It is my experience that being successful on the
right side requires a different mind-set and different technical skills. If people
are
30
flexible enough to make a mind-set change, I think they will fmd the process of
achieving greater financial security or freedom easy. For other people, the process
might be too difficult... because many people are frozen in one quadrant, one
mind-set.
At a minimum, you will find out why some people work less, earn more, pay
less in taxes, and feel more financially secure than others. It is simply a matter
of
knowing which quadrant to work out of and when.
A GUIDE 10 FREEDOM
The CASHFLOW Quadmnt is not a set of rules. It is only a guide for those who
wish to use it. It guided Kim and me from financial struggle to financial security,
and then to financial freedom. We did not want to spend every day of our lives
having to get up and work for money.
THE DIFFERENCE BETWEEN THE
RICH AND EVERYONE ELSE
A few years ago, I read this article that said most rich people received 70
percent of their income from investments, or the T quadrant, and less than 30
percent from wages, or the "E" quadrant. And if they were an "E," the chances
were that they were employees of their own corporation.
Their income looked like this:
31
For most everyone else, the poor and the middle class, at least 80 percent of
their income comes from wages from the "E" or "S" quadrants and less than 20
percent from investments, or the "I" quadrant.
THE DIFFERENCE BETWEEN BEING
RICH AND BEING WEALTHY
In Chapter 1, I wrote that my wife and I were millionaires by 1989, but we
were not financially free until 1994. There is a difference between being rich and
being wealthy. By 1989, our business was making us a lot of money. We were
earning more and working less because the business system was growing without
any more physical effort on our part. We had achieved what most people would
consider financial success.
We still needed to convert the cash flow coming from the business into even
more tangible assets that would throw off additional cash flow. We had grown our
business into a success, and it was now time to focus on growing our assets to the
point where the cash flow from all of our assets would be greater than our living
expenses.
Our diagram looked like this:
Balance Sheet
LiabIlides
By 1994, the passive income from all of our assets was greater than our
expenses. Then, we were wealthy.
Income Susement
Income
Expense
Balance Sheet
Assets
Liabilities
33
In actuality, our business would also be considered an asset because it
generated income and operated without much physical input. For our own
personal sense of wealth, we wanted to make sure we had tangible assets such as
real estate and stocks that were throwing off more passive income than our
expenses, so we could really say we were wealthy. Once the income from our
asset column was greater than the money coming in from the business, we sold
the business to our partner. We were now wealthy.
THE DEFINITION OF WEALTH
The definition of wealth is: "The number of days you can survive, without
physically working (or anyone else in your household physically working) and still
maintain your standard of living."
For example: If your monthly expenses are $1,000 a month, and if you have
$3,000 in savings, your wealth is approximately 3 months or 90 days. Wealth is
measured in time, not dollars.
By 1994, my wife and I were wealthy indefinitely (barring great economic
changes) because the income from our investments was greater than our monthly
expenses.
Ultimately, it is not how much money you make that matters, but how much
money you keep and how long that money works for you. Every day I meet many
people who make a lot of money, but all of their money goes out the expense
column. Their cash flow pattern looks like this:
Income 54alessent
Job
Income

34
Every time they make a little more money, they go shopping. They often buy a
bigger house or new car, which results in long-term debt and more hard work, and
nothing is left to go into the asset column. The money goes out so fast, you'd
think
they took some kind of financial laxative.
RED LINE FINANCES
In the world of cars, there is a saying about "keeping the engine at red line."
"Red line" means the throttle is keeping the RPMs of the engine as dose to the
"red line," or the maximum speed the car's engine can maintain, without blowing
UP•
When it comes to personal finances, there are many people, rich and poor,
who operate constantly at the financial "red line." No matter how much money
they make, they spend it as fast as it comes in. The trouble with operating your
car's engine at "red line" is that the life expectancy of the engine is shortened.
The
same is true with operating your finances at the "red line."
Several of my medical doctor friends say the main problem they see today is
stress caused by working hard and never having enough money. One says that the
biggest cause of health disorders is something she calls, "cancer of the wallet."
MONEY MAKING MONEY
Regardless of how much money people make, ultimately they should put
some in the 1" quadrant. The "I" quadrant deals specifically with the idea of
money making money. Or the idea that your money works so that you do not
have to work. Yet it is important to acknowledge that there are other forms of
investing.
OTHER FORMS OF INVESTING
People invest in their education. Traditional education is important because the
better your education, the better your chances of earning money. You can spend
four years in college and have your income earning potential go from $24,000 a
year to $50,000 a year or more. Given that the average person spends 40 years or
more actively working, four years' worth of college or some type of higher
education is an excellent investment.
Loyalty and hard work is another form of investing, like being a lifelong
employee of a company or the government. In return, via contract, that individual
is rewarded with a pension for life. That is a form of investment popular in the
Industrial Age but obsolete in the Information Age.
Other people invest in having large families and, in turn, have their children
35
care for them in their old age. That form of investing was the norm in the past,
yet
due to economic constraints in the present, it is becoming more difficult for
families to handle the living and medical expenses of parents.
Government retirement programs such as Social Security and Medicare in
America, which are often paid for through payroll deduction, is another form of
investment mandated by law. But due to massive changes in demographics and
costs, this form of investment may not be able to keep some of the promises it has
made.
And there are independent investment vehicles for retirement that are called
individual retirement plans. Often, the federal government will offer tax
incentives
to both the employer and employee to participate in such plans. In America, one
popular plan is the 401(k) retirement plan, and in countries such as Australia,
they
are called "Superannuation" plans.
INCOME RECEIVED FROM INVESTMENTS
Although the above are all forms of investing, the "I" quadrant focuses on
investments that generate income on an ongoing basis during your working years.
So to qualify as a person who operates as an "I," use the same criteria used in all
the other quadrants. Do you receive current income from the "I" quadrant? In other
words, is your money working for you and generating current income for you?
Let's look at a person who buys a house as an investment and rents it out. If
the rent collected is greater than the expenses to operate the property, that
income
is coming from the "I" quadrant. The same is true for people who receive income
as interest from savings, or dividends from stocks and bonds. So the qualifier for
the "I" quadrant is how much income you generate from the quadrant without
working in it.
IS MY RETIREMENT ACCOUNT A
FORM OF INVESTMENT?
Regularly putting money into a retirement account is a form of investing and is
a wise thing to do. Most of us hope to be considered investors when our working
years are over... but for the sake of this book, the "I" quadrant represents a
person
whose income comes from investments during their working years. In reality, most
people are not investing in a retirement account. Most are saving money in their
retirement account, hoping that, when they retire, there will be more money
coming out than they put in.
There is a difference between people who save money in their retirement
accounts and people who, through investing, actively use their money to make
36
more money as income.
ARE STOCKBROKERS INVESTORS?
Many people who are advisers in the investment world are, by definition, not
really people who generate their income from the "I" quadrant.
For example, most stockbrokers, real estate agents, financial advisers, bankers
and accountants are predominantly "E's" or "S's." In other words, their income
comes from their professional work, not necessarily from assets they own.
I also have friends who are stock traders. They buy stocks low and hope to
sell high. In reality, their profession is "trading," much like a person who owns a
retail shop and buys items at wholesale and sells them at retail. There is still
something they physically must do to generate the money. So they would fit more
into the "S" quadrant than the "I" quadrant.
Can all of these people be investors? The answer is "yes," but it is important to
know the difference between someone who earns money from commissions, or
sells advice by the hour, or gives advice for a salary, or tries to buy low and
sell
high, and someone who earns money from spotting or creating good investments.
There's one way to find out how good your advisers are Ask them what
percentage of their income comes from commissions or fees for their advice vs.
income that comes from passive income, income from their investments or other
businesses they own.
I have several CPA friends who tell me, without violating client confidentiality,
that many professional investment advisers have little in the way of income from
investments. In other words, "They do not practice what they preach."
ADVANTAGES OF INCOME FROM THE "I" QUADRANT
So the primary distinction of people who earn their money from the "I"
quadrant is that they focus on having their money make money. If they are good at
it, they can have that money work for them and for their family for hundreds of
years.
Besides the obvious advantages of knowing how to make money with money
and not having to get up and go to work, there also are many tax advantages that
are not available to people who have to work for their money.
One of the reasons the rich get richer is because they sometimes can make
millions and legally not pay taxes on that money. That's because they make money
in the "asset column," not in the "income column." Or they make money as
investors, not workers.
For people who work for money, not only are they often taxed at higher rates,
37
their taxes are withheld from their wages and they never even see that portion of
their income.
Willr AREN'T MORE PEOPLE. INVESTORS?
The "I" quadrant is the quadrant for working less, earning more, and paying
less in taxes. So why aren't more people investors? The same reason many people
do not start their own businesses It can be summed up in one word: "risk."
Many people do not like the idea of handing over their hard earned money
and not having it come back. Many people are so afraid of losing, they choose not
to invest or risk their money at all... no matter how much money they could make
in return.
A Hollywood celebrity once said: "It's not return on the investment that I
worry about. It's the return of the investment."
This fear of losing money seems to divide investors into four broad categories:
I. People who are risk-adverse and do nothing but play it safe, keeping their
money in the bank.
2. People who turn the job of investing over to someone else, such as a
financial adviser or mutual fund manager.
3. Gamblers.
4. Investors.
The difference between a gambler and an investor is this. For a gambler,
investing is a game of chance. For an investor, investing is a game of skill. And
for
the people who turn their money over to someone else to invest, investing is often
a game they do not want to learn. The important thing for these individuals is to
choose a financial adviser carefully.
In an upcoming chapter, this book will go into the seven levels of investors,
which should shed more light on this subject.
RISK CAN RE VIRTUALLY ELIMINATED
The good news about investing is that risk can be greatly minimized or even
eliminated, and you can still receive high yields on your money, if you know the
game.
A true investor will be heard speaking these words: "How soon do I get my
money back and how much income will receive for the rest of my life after I get
that initial investment money back?"
A true investor wants to know how soon they get their money back. People
who have a retirement account have to wait years to find out if they will ever get
their money back. This is the most extreme difference between a professional
38
investor and someone who sets money aside for retirement.
It is the fear of losing money that causes most people to seek security. Yet the
wr quadrant is not as treacherous as many people think. The "I" quadrant is like
any other quadrant. It has its own skills and mind-set. The skills to be successful
in
the
up quadrant can be learned if you're willing to take the time to learn them.
A NEW AGE BEGINS
In 1989, the Berlin Wall came down. In the history of the world, that was one
of the most important events. More than signifying the failure of communism, in
my opinion, that event marked the official end of the Industrial Age and the
beginning of the Information Age.
ME DIFFERENCE BETWEEN INDUSTRIAL-AGE
PENSION PLANS AND INFORMATION-AGE
PENSION PLANS
The voyage of Columbus in 1492 roughly coincides with the start of the
Industrial Age. The fall of the Berlin Wall in 1989 is the event that marked the
end
of that age. For some reason, it seems that every 500 years in modern history,
great
cataclysmic changes have occurred. We are in one such period right now.
That change has already threatened the financial security of hundreds of
millions of people, most of whom are not yet aware of the financial impact of that
change and many of whom cannot afford it. The change is found in the difference
between an Industrial Age pension plan and an Information Age pension plan.
When I was a boy, my rich dad encouraged me to take risks with my money
and learn to invest. He would always say: "If you want to get rich, you need to
learn how to take risks. Learn to be an investor?
At home, I told my educated dad about my rich dad's suggestion that we learn
how to invest and learn to manage risk. My educated dad replied, "I don't need to
learn how to invest. I have a government pension plan, a pension from the
Teachers Union, and Social Security benefits guaranteed. Why take risks with my
money"
My educated dad believed in Industrial Age pension plans, such as
government-employee pensions and Social Security. He was happy when I signed
up for the U.S. Marine Corps. Instead of being worried that I might lose my life in
Vietnam, he simply said, "Stay in for 20 years and you will get a pension and
medical benefits for life."
Although still in use, such pension plans officially have become obsolete. The
idea of a company being financially responsible for your retirement and the
39
government picking up the balance of your retirement needs through pension
schemes is an old idea that is no longer valid.
PEOPLE NEED TO BECOME INVESTORS
As we move from Defined Benefit pension plans, or what I call Industrial Age
retirement plans, to Defined Contribution pension plans, or Information Age
pension plans, the result is that you as an individual must now be financially
responsible for yourself. Few people have noticed the change.
INDUSTRIAL AGE PENSION PLAN
In the Industrial Age, a Defined Benefit pension plan meant that the company
guaranteed you, the worker, a defined amount of money (usually paid monthly)
for as long as you lived. People felt secure because these plans assured a steady
income.
INFORMATION AGE PENSION PLAN
Somebody changed the deal, and companies suddenly were no longer
guaranteeing financial security at the end of your working days. Instead,
companies began offering Deemed Contribution retirement plans. "Defined
Contribution" means that you are only going to get back what you and the
company have contributed while you were working. In other words, your pension
is defined solely by what has been contributed. If you and your company put no
money in, you get no money out.
The good news is that in the Information Age, life expectancy will go up. The
bad news is that you might outlive your pension.
RISKY PENSION PLANS
And worse than that, what you and your employer put into the plan is no
longer guaranteed to exist when you decide to pull it out. This is because plans
like 401(k)s and Superannuations, are subject to market forces. In other words, one
day you could have a million dollars in the account, and if there were a stock-
market crash, which every market occasionally has, your million dollars could be
cut in half or even wiped out. The guarantee of lifelong income is gone... and I
wonder how many people who have these plans realize what this means.
It could mean that people who retire at 65, and begin to live on their Defined
Contribution plan, could run out of money by, let's say, age 75. Then, what do
they do? Dust off the resume.
And what about the government's Defined Benefit pension plan? Well, in the
40
United States, Social Security is expected to be bankrupt by the year 2032 and
Medicare bankrupt by 2005, just when baby boomers begin needing it. Even today,
Social Security does not provide much in the way of income. What will happen
when 77 million baby boomers begin to want the money they paid in... but k's not
there?
In 1998, President Clinton's popular cry of "Save Social Security" was well
received. Yet as Democratic Senator Ernest Hollings pointed out, "Obviously the
first way to save Social Security is to stop looting it." For decades, the federal
government has been responsible for "borrowing" the retirement money for
expenditures.
Many politicians seem to think that Social Security is income that can be spent
rather than an asset that should be held in trust.
TOO MANY PEOPLE COUNTING ON
THE GOVERNMENT
1 write my books and build my products, such as the educational board game
CASHROW, because we are at the end of the Industrial Age and just getting
started in the Information Age.
My concern as a private citizen is that from my generation forward, we are not
properly prepared to handle the differences between the Industrial Age and the
Information Age... and one of those differences is how we prepare financially for
our retirement years. The idea of "go to school and get a safe, secure job" was a
good idea for people born before 1930. Today, everyone needs to go to school to
learn to get a good job, but we also need to know how to invest, and investing is
not a subject taught in school.
One of the hangovers of the Industrial Age is that too many people have
become dependent on the government to solve their individual problems. Today
we are facing even bigger problems because of the delegation to the government
of our personal financial responsibility.
It is estimated that by the year 2020, there will be 275 million Americans, with
100 million of them expecting some kind of government support. This will include
federal employees, military retirees, postal workers, schoolteachers and other
government employees, as well as retirees expecting Social Security and Medicare
payments. And they are contractually correct in expecting it because, in one way
or another, most have been investing in that promise. Unfortunately, there have
been too many promises made for years, and now the bill is coming due.
And I do not think those financial promises can be kept. If our government
begins to raise taxes even higher to pay for those promises, those who can escape
41
will escape to countries that have lower taxes. In the Information Age, the term
"offshore" will not mean another country as a tax haven... "offshore" could mean
"cyberspace."
A GREAT CHANGE IS AT HAND
I recall President John F. Kennedy warning, "A great change is at hand."
Well, that change is here.
Or as Bob Dylan, a prophet of the baby-boom generation, said in his song The
Times Tbey Are A-cbanging, "You better start swimming or you'll sink like a stone."
INVESTING WITHOUT BEING INVESTORS
The change from Defined Benefit to Defined Contribution pension plans is
forcing millions of people throughout the world to become investors, with little
investor education. Many people who have spent their lives avoiding financial risks
are now being forced to take them... Financial risks with their future, their old
age,
the end of their working years. Most will find out if they were wise investors or
careless gamblers only when it comes time to retire.
Today, the stock market is the talk of the world. It is fueled by many things,
one of which is non-investors trying to become investors. Their financial path
looks like this:
A large majority of these people, the "E's" and "S's," are people who by nature
are security oriented. That is why they seek secure jobs or secure careers, or
start
small businesses they can control. They are migrating today, because of the
42
Defined Contribution retirement plans, to the "I" quadrant, where they hope they
will find "security" for when their working years are over. Unfortunately, the "I"
quadrant is not known for its security. The T quadrant is the quadrant of risk.
Because so many people on the left side of the CASIFLOW Quadrant come
looking for security, the stock market responds in kind. That is why you hear so
often the following words:
I. "Diversification." People who seek security use the word "diversification° a
lot. Why? Because the strategy of diversification is an investment strategy for
"not losing." It is not an investment strategy for winning. Successful or rich
investors do not diversify. They focus their efforts.
Warren Buffett, possibly the world's greatest investor, says this about "
diversification": "The strategy we've adopted precludes our following
standard diversification dogma. Many pundits would therefore say the
strategy must be riskier than that employed by more conventional investors.
We disagree. We believe that a policy of portfolio concentration may well
decrease risk if it raises, as it should, both the intensity with which an
investor thinks about a business and the comfort level he must feel with its
economic characteristics before buying into it."
In other words, Warren Buffett is saying that portfolio concentration or
focusing on a few investments, rather than diversifying, is a better strategy.
In his mind, concentration rather than diversification requires you to
become smarter, more intense in your thoughts and actions. His article
goes on to say that average investors avoid volatility because they think
volatility is risky. Warren Buffet says instead, "In fact, the true investor
welcomes volatility."
For my wife and me to get out of financial struggle and find financial
freedom, we did not diversify. We concentrated our investments.
2. "Blue Chip Stocks.° Security-minded investors usually buy "Blue Chip"
companies. Why? Because in their mind, they are safer. While the company
might be safer, the stock market is not.
3. "Mutual Funds." People who know little about investing feel more secure
about turning their money over to a fund manager they hope will do a
43
better job than they can. And this is a smart strategy for people who have
no intention of becoming professional investors. The problem is, as smart as
this strategy is, it does not mean that mutual funds are less risky. In fact, if
there is a stock-market crash, we might see what I call the "Mutual Fund
Meltdown,* a financial catastrophe as devastating as the "Tulipornania" crash
in 1610, the "South Seas Bubble" meltdown of 1620, and the "Junk Bond"
bombshell of 1990.
Today, the market is filled with millions of people who, by nature, are security
minded, but due to the changing economy are being forced to cross from the left
side of the CASFFLOW Quadrant into the right side, where their brand of security
does not really exist. That causes me concern. Many people think their pension
plans are safe, when they really are not. If there is a crash or a major
depression,
their plans could be wiped out. Their retirement plans are not as safe as the
retirement plans our parents had.
GREAT ECONOMIC UPI LEAV.ALS COMING
The stage is set for a great economic upheaval. Such upheavals have always
marked the end of an old era and the birth of a new era. At the end of every age
there are people who move forward and other people who cling to ideas of the
past. I am afraid that for people who still expect that their financial security is
the
responsibility of a big company or big government, they will be disappointed in
the coming years. Those are ideas of the Industrial. Age, not the Information Age.
No one has a crystal ball. I subscribe to many investment news services. Each
one says something different Some say the near future is bright. Some say a
market crash and major depression are right around the corner. To remain
objective, I listen to both sides, because both sides have points worth listening
to,
The tack I take is not one of playing fortuneteller and trying to predict the
future;
instead I work at staying educated in both the "B" and "I" quadrants and being
prepared for whatever happens. A person who is prepared will prosper no matter
which direction the economy goes, whenever it goes.
if history is any indicator, a person who lives to the age of 75 should anticipate
going through one depression and two major recessions. Well, my parents went
through their depression, but the baby boomers have not... yet. And it has been
approximately 60 years since the last depression hit.
Today we all need to be concerned with more than just job security. I think
we also need to be concerned about our own long-term financial security... and
not leave that responsibility to a company or the government The times officially
44
changed when companies said that they were no longer responsible for your
retirement years. Once they switched to the Defined Contribution retirement plan,
rhe message was that you were now responsible for investing in your own
retirement. Today, we all need to become wiser investors, ever vigilant of the
changes in the ups and downs of the financial markets. I recommend learning to
be an investor rather than giving your money to somebody else to invest for you.
If you simply turn your money over to a mutual fund or to an adviser, you may
have to wait until you're 65 to find out if that person did a good job. If they did
a
lousy job, you may have to work for the rest of your life. Millions of people will
have to do just that because it will be too late for them to invest or learn about
investing.
LEARN IT) MANAGE RISK
it is possible to invest for high returns with low risk. All you have to do is
learn how k's done. It is not hard. In fact, k's much like learning how to ride a
bike. In the early stages, you may fall down, but after a while, the falling stops
and
investing becomes second nature, just as riding a bicycle is for most of us.
The problem with the left side of the CASHFLOW Quadrant is that most
people go there to avoid financial risk. Instead of avoiding risk, I recommend
learning how to manage financial risk.
TAKE A RISK
People who take risks change the world. Few people ever get rich without
taking risks. Too many people have come to depend on government to eliminate
the risks of life. The beginning of the Information Age is the end of big
government as we know It Big government has just become too expensive.
Unfortunately, the millions of people around the world that have come to depend
upon the idea of "entitlements" and pensions for life will be left behind
financially.
The Information Age means we all need to become more self-sufficient and begin
to grow up.
The idea of "study hard and find a safe, secure job" is an idea born in the
Industrial Age. We're not in that age anymore. The times are changing. The
problem is many people's ideas have not They still think they're entitled to
something. Many still think that the 1" quadrant is not their responsibility. They
continue to think that the government or a big business or the labor union or their
mutual fund or their family will take care of them when their working days are
over. For their sake, I hope they're right. These individuals have no need to
read farther.
45
It is my concern for those people who recognize the need to become investors
that prompted me to write The CASIELOW Quadrant. It was written to help
individuals who want to make the move from the left side of the Quadrant to the
right side, but don't know where to start. Anyone can make the move with the
right skills and determination.
If you have already found your own financial freedom, I say,
"Congratulations." Please tell others about your path, and guide them if they want
to be guided. Guide them, but let them find their own path, for there are many
paths to financial freedom.
Regardless of what you decide, please remember this. Financial freedom might
be free, but it does not come cheap. Freedom has a price... and to me it is worth
the price. The big secret is this: It takes neither money to be financially free
nor a
good formal education. It also doesn't have to be risky. Instead, freedom's price
is
measured in dreams, desire and the ability to overcome disappointments that occur
to all of us along the way. Are you willing to pay the price?
One of my fathers paid the price; the other didn't. He paid a different kind
of price.
The B Quadrant Quiz
Are you a true business owner?
You are if you can answer 'TES" to the
following question:
Can you leave your business for a year or more
and return to find it more profitable and
running better than when you left it?
7 Yes n No
46
CHAPTER 3
Why People
Choose Security
Over Freedom
oth of my dads recommended that I go to college and get a college
Lldegree. But it was after receiving the degree that their advice to
me changed.
My highly educated dad constantly advised: "Go to school, get good grades,
and then get a good safe, secure job."
He was recommending a life path focused on the left side of the Quadrant
that looked like this.
SCHOOL
47
My uneducated but rich dad advised focusing on the right side of the
Quadrant "Go to school, get good grades, and then start your own company."
SCHOOL
Their advice was different because one dad was concerned with job security,
and the other was more concerned about financial freedom.
WHY PEOPLE SEEK JOB SECURITY
The primary reason many people seek job security is because that is what they
are taught to seek, at home and at school.
Millions of people continue to follow that advice. Many of us have been
conditioned from our earliest days to think about job security, rather than
financial
security or financial freedom. And because most of us learn little to nothing about
money at home or at school, it is only natural that many of us cling even more
tightly to the idea of job security.. *instead of reaching for freedom.
If you look at the CASHFLOW Quadrant, you will notice that the left side is
motivated by security, and the right side is motivated by freedom.
48
TRAPPED BY DEBT
The main reason that 90 percent of the population is working on the left side
is simply because that is the side they learn about at school. They then leave
school and are soon deeply in debt. So deeply in debt that they must cling even
tighter to a job, or professional security, just to pay the bills.
Often I meet young people who receive their college diploma along with the
bill for their college loans. Several of them have reported being depressed when
they see that they are $50,000 to $150,000 in debt for their college education. If
the
parents paid for their education, then the parents are strapped financially for
years.
I recently read that most Americans today will receive a credit card while still
in school and will be in debt for the rest of their lives. That is because they are
often following a script that became popular in the Industrial Age.
FOLLOWING THE SCRIPT
If we track the life of average educated people, the financial script often goes
like this:
The child goes to school, graduates, finds a job and soon has some money to
spend. The young adult now can afford to rent an apartment, buy a TV set, new
clothes, some furniture and, of course, a car. And now the bills begin to come in.
One day, the adult meets someone special, sparks fly, they fall in love and get
married. For a while, life is blissful because two can live as cheaply one. They
now
have two incomes, only one rent to pay, and they can afford to set a few dollars
aside to buy the dream of all young couples, their own home. They find their
dream home, pull the money from savings and use it for a down payment on the
house, and they now have a mortgage. Because they have a new house, they need
new furnishings, so they find a furniture store that advertises those magic words,
"No money down, easy monthly payments."
Life is wonderful, and they throw a party to have all their friends over to see
their new house, new car, new furniture, and new toys. They are now deeply in
debt for the rest of their lives. Then, the first child arrives.
The average well-educated, hard-working couple, after dropping the child off
at nursery school, must now put their nose to the grindstone and go to work. They
become trapped by the need for job security simply because, on average, they are
less than three months away from financial bankruptcy. From these people you
often hear, "I can't afford to quit. I have bills to pay," or a modification from a
song
from Snow White and the Seven Dwarfs, "I owe, I owe, so it's off to work I go."
Or from Tennessee Ernie Ford's song from the '50s:
"You load 16 tons and what do you get?
49
Another day older and deeper in debt.
Saint Peter don't you take me 'cause I can't go.
I owe my soul to the company store."
WE SUCCESS TRAP
One of the reasons I learned so much from my rich dad was because he had
the free time to teach me. As he grew more successful, he had more free time and
money. If business got better, he did not have to work harder. He simply had his
president expand the system and hire more people to do the work. If his
investments did well, he reinvested the money and made more money. Because of
his success, he had more free time. He spent hours with both his son and me
explaining to us everything he was doing in business and investing. I was learning
more from him than I was learning at school. That is what happens when you
work hard on the tight side of the Quadrant, the "B" and "I" side.
My highly educated dad worked hard also, but he worked hard on the left
side of the Quadrant. By working hard, getting promoted and gaining more
responsibility, he had less and less free time to spend with his kids. He would
leave for work at 7 a.m., and many times we would not see him because we had
to go to bed before he got home. That is what happens when you work hard and
become successful on the left side of the Quadrate. Success brings you less and
less time... even if it does bring more money.
THE MONEY TRAP
Success on the right side of the Quadrant requires a knowledge about money
sailed "financial intelligence." Rich dad defined it this way: "Financial
intelligence is
not so much how much money you make, but how much money you keep, how
hard that money works for you, and how many generations you keep it for."
Success on the right side of the Quadrant requires financial intelligence. If
people lack basic financial intelligence, they will, in most cases, not survive on
the
right-side of the Quadrant.
My rich dad was good with money and with people at work. He had to be. He
was responsible for creating money, managing as few people as possible, keeping
costs low, and keeping profits high. Those are the skills necessary for success on
the right side of the Quadrant
It was my rich dad who stressed to me that your home is not an asset but a
liability. He could prove It because he taught us to be financially literate so we
were
able to read numbers. He had the free time to teach his son and me because he
was good at managing people. His skills from work carried over into his home life.
50
My educated dad did not manage money and people at work, although he
thought he did. As the state Superintendent of Education, he was a government
official with a multimillion dollar budget and thousands of employees. But it was
not money he created. It was taxpayers' money, and his job was to spend all of it.
if he did not spend it, the government would give him less money the next year.
So at the end of each fiscal year he was looking for ways to spend it all, which
meant he often hired more people to justify next year's budget. The funny thing
was, the more people he hired, the more problems he had.
As a young boy, observing both fathers, I began to take mental notes of what
kind of life I wanted to lead.
My educated dad was a voracious reader of books, so he was word literate,
but he was not financially literate. Because he could not read numbers, he had to
take the advice of his banker and accountant, and both told him that his house
was an asset, and that it should be his largest investment.
Because of this financial advice, not only did my highly educated dad work
harder, but he also got further into debt. Every time he received a promotion for
his hard work, he also got a pay raise, and with each pay raise he went into a
higher tax bracket. Because he was in a higher tax bracket, and taxes for high-
inoome workers in the 1960s and 1970s were extremely high, his accountant and
banker would tell him to buy a bigger house so he could write off the interest
payments. He made more money, but all that happened was his taxes increased
and his debt increased. The more successful he got, the harder he had to work,
and the less time he had with the people he loved. Soon, all the children were
gone from home, and he was still working hard just to keep up with the bills.
He always thought that the next promotion and pay raise would solve his
problem. But the more money he made, the more the same things happened. He
got deeper into debt and paid more in taxes.
The more frazzled he got, both at home and at work, the more he seemed to
depend on job security. The more emotionally attached he got to his job, and a
paycheck to pay the bills, the more he encouraged his kids to "get a safe, secure
job."
The more insecure he felt, the more he sought security.
OUR TWO BIGGEST EXPENSES
Because my dad could not read financial statements, he could not see the
money trap he was getting into as he grew more successful. It's the same money
trap I see millions of other successful hard-working people fall into.
The reason so many people struggle financially is because every time they
51
make more money, they also increase their two biggest expenses:
I. Taxes.
2. Interest on debt.
To top it off, the government often offers you tax breaks to get deeper into
debt. Doesn't that make you a little suspicious?
As my rich dad defined financial intelligence: "It's not so much how much you
make, but how much you keep, how hard it works for you, and how many
generations you keep it for."
At the end of my hard-working educated dad's life, the little money he did
have to pass on... was taken by the government in probate taxes.
THE SEARCH FOR FREEDOM
I know many people search for freedom and happiness. The problem is most
people have not been trained to work from the "B" and "I" quadrants. Because of
this lack of training, the programming into job security, and their increasing
amount of debt, most people limit they search for financial freedom to the left
side
of the CASE/FLOW Quadrant. Unfortunately, financial security or financial freedom
are seldom found in the "E" or "S" quadrant. True security and freedom are found
on the right side.
GOING FROM JOB TO JOB IN SEARCH OF FREEDOM
One thing the CASHFLOW Quadrant is useful for is to track or observe a
person's life pattern. Many people spend their life in search of security or
freedom,
but wind up instead going from job to job. For example:
I have a friend from high school. I hear from him about every five years, and
he is always excited because he has found the perfect job. He is ecstatic because
he has found the company of his dreams. He loves the company. It's doing
exciting things. He loves his work, he has an important title, the pay is great,
the
people are great, the benefits are great, and his chances for promotion are great.
About four and a half years later, I hear from him again, and by this time, he is
dissatisfied. The company he works for is now corrupt and dishonest, in his
opinion; it doesn't treat its workers with respect; he hates his boss; he was
passed
over for a promotion, and they don't pay him enough. Six months go by and he's
happy again. He's ecstatic because he's found the perfect job... again.
52
His life's path looks something like a dog chasing its tail. It looks like this.
His life pattern is going from job to joh. So far, he lives well because he is
smart, attractive and personable. But the years are catching up with him, and
younger people are now getting the jobs he used to get. He has a few thousand
dollars in savings, nothing set aside for retirement, a house he will never own,
child support payments, and college yet to pay for. His youngest child, 8, lives
with his ex-wife, and his oldest child, 14, lives with him.
He used to always say to me, "I don't have to worry. I'm still young. I have
time."
I wonder if he's saying that now.
In my opinion, he needs to make a serious effort to begin moving to either the
"B" or the "I" quadrant quickly. A new attitude and a new educational process
need to begin. Unless he gets lucky and wins the lottery, or finds a rich woman to
many, he is on a course of working hard for the rest of his life.
DOING YOUR OWN THING
"E's" BECOME "S's"
Another common pattern is someone going from "E" to "S." During this current
period of massive downsizing, many people are getting the message and are
leaving their jobs with big companies to start their own businesses. There is a
boom in so-called "home-based businesses." So many people made the decision to
"Start their own business," "Do their own thing" and "Be their own boss."
53
Their career path looks like this.
Of all the life paths, this is the one I feel for the most. In my opinion, being an
"S" can be the most rewarding and also the most risky. I think the "S" quadrant is
the hardest quadrant there is. The failure rates are high. And if you make it,
being
successful can be worse than failing. That is because if you are successful as an
"S," you will work harder than if you were in any of the other quadrants... and
you will work harder for a long time. For as long as you are successful.
The reason "S's" work the hardest is because they typically are the proverbial
"chief cook and bottle washer." They have to do or be responsible for all the jobs
that in a bigger company are done by many managers and employees. An "S" just
starting out often answers the phone, pays the bills, makes sales calls, tries to
advertise on a small budget, handles customers, hires employees, fires employees,
fills in when employees do not show up, talks to the tax man, fights off the
government inspectors, and on and on.
Personally I cringe whenever I hear someone say they're going to start their
own business. I wish them well, yet I feel great concern for them. I have seen so
many "FS" take their life savings or borrow money from friends and family to start
their own business. After three or so years of struggle and hard work, the business
folds, and instead of life savings, they have debt to pay off.
Nationally, nine out of 10 of these types of businesses fail in five years. Of the
one that is remaining, nine out of 10 of them fail in the next five years. In other
words, 99 out of 100 small businesses ultimately disappear in 10 years.
I think the reason most fail in the first five years is due to the lack of
experience and lack of capital. The reason the one survivor often fails in the
second five years is not due to lack of capital, but lack of energy. The hours of
54
CHAPTER 4
The 3 Kinds Of
Business Systems
I
n moving to the "B" quadrant, remember that your goal is to own a
system and have people work that system for you. You can develop the
business system yourself or you can look for a system to purchase. Think
of the system as the bridge that will allow you to cross safely from the left
side of the CASHFLOW Quadrant to the right side... your bridge to
financial freedom.
There are three main types of business systems commonly in use today.
They are:
1. Traditional C-type corporations - where you develop your own system.
2. Franchises - where you buy an existing system.
3. Network Marketing - where you buy into and become part of an
existing system.
Each has its strengths and weaknesses, yet each ultimately does the same
thing. If operated properly, each system will provide a steady stream of income
without much physical effort on the part of the owner... once it is up and running.
The problem is getting it up and running.
In 1985, when people asked, "Why were you homeless?" Kim and I simply
said, "We were building a business system."
69
It was a business system that was a hybrid of the traditional C-type
corporation and a franchise. As stated before, the "B" quadrant requires a
knowledge of both systems and people.
Our decision to develop our own system meant a lot of hard work. I had
taken this route before, and my company had failed. Although it was successful for
years, it suddenly went broke in its fifth year. When success came to us, we were
not ready with an adequate system. The system began to break down even though
we had hard-working people. We felt like we were on a good-size yacht that had
sprung a leak, but we could not find the leak. All of us were trying to figure out
where the leak was, but we could not bail water fast enough to find the leak and
fix it. Even if we found it, we were not;certain we could plug it.
"YOU MAY LOSE 2 OR 3 COMPANIES"
When I was in high school, my rich dad told his son and me that he had lost a
company when he was in his 20s. "That was the best and worst experience of my
life," he said. "As much as I hated it, I learned more by repairing it and
eventually
turning it into a huge success."
Knowing that I was contemplating starting my own company, rich dad said to
me, "You may lose two or three companies, before you build a successful one that
lasts."
He was training Mike, his son, to take over his empire. Because my dad
was a government employee, I was not going to inherit an empire. I had to build
my own.
70
SUCCESS IS A POOR TEACIIEI?
"Success is a poor teacher," Rich dad always said. "We learn the most about
ourselves when we fail... so don't be afraid of failing. Failing is part of the
process
of success. You cannot have success without failure. So unsuccessful people are
people who never fail."
Maybe it was a self-fulfilling prophecy, but in 1984, the company that went
down was company No. 3. I had made millions and had lost millions and was
starting all over again when I met Kim. The reason I know she did not marry me
for my money is because I did not have any money. When I told her what I was
going to do, build company No. 4, she did not back away.
"I'll build it with you," was her reply, and she was true to her word. Along
with another partner, we built a business system with 11 offices worldwide that
generated income regardless of whether we worked. Building it from nothing to 11
offices took five years of blood, sweat and tears... but it worked. Both dads were
happy for me and sincerely congratulated me (they had both lost money in my
previous experiments at starting companies).
TILE HARD PART
Mike, my rich dad's son, has often said to me, "I will never know if I can do
what you did or my dad did. The system was handed to me, and all I had to do
was learn how to run it."
I am certain he could have developed his own successful system because he
learned well from his dad. Yet, I understand what he meant. The hard thing about
building a company from scratch is that you have two big variables: the system
and the people building the system. If both the people and the system are leaky,
the chances for failure are great. Sometimes it is hard to know whether the
problem is the person or the system that is failing.
BEFORE FRANCHISES
When my rich dad began teaching me about becoming a "B," there was only
one kind of business. That was big business... a major corporation that usually
dominated the town. In our town in Hawaii, it was the sugar plantation that
controlled virtually every thing... including the other big businesses. So there
were
big businesses and mom-and-pop "S"-type businesses with little in between.
To be able to work at the top levels of those big sugar companies was not a
likely goal for people like rich dad and me. Minorities, such as the Japanese,
Chinese and Hawaiians worked in the fields, but were never allowed in the
boardroom. So rich dad learned everything he knew simply by trial and error.
71
As I started high school, we began to hear about a thing called "franchises,"
but none had come to our little town. We had not heard about McDonald's or
Kentucky Fried Chicken or Taco Bell. They were not a part of our vocabulary
while I was studying with rich dad. When we did hear rumors about them, we
heard they were Illegal, fraudulent scams and dangerous." Naturally, upon hearing
those rumors, rich dad flew to California to begin checking franchises out, rather
than believing the gossip. When he returned, all he said was, "Franchises are the
wave of the future," and he bought the rights to two of them. His wealth
skyrocketed as the idea of franchises caught on, and he began selling his rights to
other people so they could have a chance at building their own businesses.
When I asked him if I should buy one from him, he simply said, "No. You've
come this far in learning how to build your own business system; don't stop now.
Franchises are for people who do not want to build or do not know how to build
their own systems. Besides, you don't have the $250,000 it takes to buy a franchise
from me."
It is hard to imagine today a city without a McDonald's or Burger King or Pizza
Hut on every corner. Yet, there was a time, not too long ago, when they did not
exist. And I'm old enough to remember those days.
HOW TO LEARN TO BECOME A "B'
The way I learned to become a "B" was by being an apprentice to my rich
dad. His son and I were both "E's" learning to be "B's." And that is the way many
people learn. It's called "on-the-job training." This is the way many closely held
family empires are passed on from one generation to the next.
The problem is, nor too many people are privileged or lucky enough to learn
the "behind-the-scene" aspects of becoming a "B." Most corporate "management-
training programs" are just that — the company only trains you to be a manager.
Few teach what it takes to be a "B."
Often people get stuck in the "S" quadrant in their journey to the "B" quadrant.
This happens primarily because they do not develop a strong enough system, and
so they end up becoming an integral part of the system. Successful "B's" develop a
system that will run without their involvement.
There are three ways you can make it to the "B" side quickly.
1. Find a mentor. My rich dad was my mentor. A mentor is someone who
has already done what you want to do... and is successful at doing it. Do
not find an adviser. An adviser is someone who tells you how to do it, but
has not personally done it. Most advisers are in the "S" quadrant. The world
72
is filled with "S's" trying to tell you how to be a "B" or an "L" My rich dad
was a mentor, not an adviser. One of the biggest tips my rich dad gave me
was this:
"Be careful of the advice you take. While you must keep your mind open,
always be first aware of which quadrant the advice is coming from."
My rich dad taught me about systems and how to be a leader of people, not a
manager of people. Managers often see their subordinates as inferiors. Leaders
must direct people who are often smarter.
If you would like to read an excellent book about the basics of starting your
own business system, check out Eytb, by Michael Gerber. For people who want
to learn to develop their own system, this book is priceless.
A traditional way of learning about systems is to get your MBA from a
prestigious school and get a fast-track job up the corporate ladder. An MBA is
important because you learn the basics of accounting and how the financial
numbers relate to the systems of a business. Yet, just because you have an MBA
does not automatically mean you are competent to run all the systems that
ultimately make up a complete business system.
To learn about all the systems necessary in a big company, you'll need to
spend 10 to 15 years there, learning all the different aspect of the business. You
should then be prepared to leave and start your own company. 'Working for a
successful major corporation is like being paid by your mentor.
Even with a mentor and/or years of experience, this first method is labor
intensive. To create your own system requires a lot of trial and error, up-front
legal
costs, and paperwork. All of this occurs at the same time you are trying to develop
your people.
2. Franchises. Another way to learn about systems is to buy a franchise.
When you buy a franchise, you are buying alried and proven" operating
system. There are many excellent franchises.
By buying the franchise system, instead of trying to create your own, you can
focus on developing your people. Buying the system removes one big variable
when you are learning how to be a "B." The reason many banks will loan money
on a franchise and not to a small start-up business is because the banks recognize
the importance of systems and how starting with a good system will lower their
risk.
A word of caution if you buy a franchise. Please do not be an "S" who wants
to "do their own thing." If you buy a franchise system, be an "E." Just do it
exactly
73
the way they tell you to do it. Nothing is more tragic than the courtroom fights
between franchisees and franchisors. The fights occur usually because the people
who buy the system really want to do it their way, not the way the person who
created the system wants it run. If you want to do your own thing, then do it after
you've mastered both systems and people.
My highly educated dad failed even though he bought a famous and
expensive ice-cream franchise. Although the system was excellent, the business
still
failed. In my opinion, the franchise failed because the people he was in
partnership with were all Ts" and "S's" who did not know what to do when
things started to get bad, and did not ask for support from the parent company. In
the end, the partners fought among themselves, and the business went down. They
forgot that a true 613 1' is more than a system. It is also dependent on good
people
to operate the system.
BANKS DON'T LEND MONEY 10 PEOPLE
WITHOUT SYSTEMS
If a bank will not lend money to a small business without a system, why
should you? Almost daily, people come to me with business plans with the hope of
raising money for their idea or their project.
Most of the time I turn them down for one main reason. The people raising
the money do not know the difference between a product and a system. I have
had friends (singers in a band) ask me to invest money in developing a new music
CD, and others who want me to help form a new nonprofit to change the world.
As much as I might like the project, the product or the person, I will turn them
down if they have little or no experience in creating and running business systems.
just because you can sing does not mean you understand the system of
marketing, or the system of finance and accounting, and the system of sales, and
the system of hiring and firing people, and the legal system, and the many other
systems that are required to keep a business afloat and make it successful.
For a business to survive and thrive, 100 percent of all the systems must be
functioning and accountable. For example:
An airplasteis a system of systems. If an airplane takes off and, let's say, the
fuel system fails, there often is a crash. The same things happen in business. It's
not the systems that you know about that are the problem — it's the systems you
are not aware of that cause you to crash.
The human body is a system of systems. Most of us have had a loved one die
because one of the body systems has failed — like the blood system, which causes
disease to spread to all of the other systems.
74
That is why building a tried-and-true business system is not easy. It is the
systems you forget about or do not pay attention to that cause you to crash and
burn. That is why I rarely invest with an "E" or "S" whO has a new product or idea.
professional investors tend to invest in proven systems with people who know
how to run those systems.
So if banks lend based only on tried-and-true systems, and look to the person
who is going to run them, then you should do the same — if you want to be a
smart investor.
3. Network marketing. Also called multilevel marketing or direct
distribution systems. Just as with franchises, the legal system initially
attempted to outlaw network marketing, and I know of some countries that
have succeeded in outlawing or severely restricting it. Any new system or
idea often goes through this period of being classified as "strange and
suspicious." At first, I also thought that network marketing was a scam. But
over the years, I have studied the various systems available through
network marketing, and I have watched several friends become successful
at this form of "B." I have changed my mind.
After I dropped my prejudices and began researching network marketing, I
found that there were many people who were sincerely and diligently building
successful network marketing businesses. When I met these people, I saw the
impact their business had on other people's lives and financial futures. I began to
truly appreciate the value of the network marketing system. For a reasonable entry
fee (often around $200), people can buy into an existing system and immediately
start building their business. Due to the technological advances in the computer
industry, these organizations are totally automated, and the headaches of
paperwork, order processing, distribution, accounting and follow-up are almost
entirely managed by the network marketing software systems. New distributors can
focus all of their efforts in building their business through sharing this
automated
business opportunity instead of worrying about the normal start-up headaches of a
small business.
One of my old friends who did more than a billion dollars in real estate in
1997 recently signed on as a network marketing distributor and began building his
business. I was surprised to find him so diligently building a network marketing
business because he definitely did not need the money. When I asked him why,
he explained it this way:
"I went to school to become a CPA, and I have an MBA in finance. When
75
people ask me how I became so rich, I tell them about the multimillion-dollar real
estate transactions I do and the hundreds of thousands of dollars in passive income
I receive each year from my real estate. I then notice that some of them withdraw
or shy away. We both know that their chances of doing multimillion-dollar real
estate investments like I do are slim to none. Besides not having the educational
background, they do not have the extra capital to invest. So I began to look for a
way I could help them achieve the same level of passive income I developed from
real estate... without going back to school for six years and spending 12 years
investing in real estate. I believe network marketing gives people the opportunity
to build up the passive income they need for support while they learn to become
professional investors. That is why I recommend network marketing to them. Even
if they have little money, they can still invest 'sweat equity' for five years and
begin
to generate more than enough passive income to begin investing. By developing
their own business, they have the free time to learn and the capital to invest with
me in my bigger deals."
My friend joined a network marketing company as a distributor, after
researching several, and started a network marketing business with people who
someday want to invest with him. He is now doing well in his network marketing
business as well as in his investment business. He told me, "I did it initially
because I wanted to help people find the money to invest, and now I'm getting
rich from a whole new business."
Twice a month, he holds classes on Saturdays. At the first meeting, he teaches
people about business systems and people, or how to develop into a successful
"B." On the second meeting of the month, he teaches them about financial literacy
and financial intelligence. He is teaching them to be savvy "I's." His class sizes
are
growing rapidly.
The pattern he recommends is the same one I recommend.
A PERSONAL FRANCHISE
And that's why today I recommend people consider network marketing. Many
famous franchises cost a million dollars or more to buy. Network marketing is like
buying a personal franchise, often for less than $200.
I know much of network marketing is hard work. But success in any quadrant
is hard work. I personally generate no income as a network marketing distributor. I
have researched several network marketing companies and their compensation
plans. While doing my research, I did join several companies, just because their
products were so good and I use them as a consumer.
Yet, if I could give you a recommendation as to finding a good organization to
help you get over to the right side of the Quadrant, the key is not so much the
product but the education the organization offers. There are network marketing
organizations that are only interested in having you sell their system to your
friends. And there are organizations primarily interested in educating you and
helping you succeed.
From my research into network marketing, I have found two important things
you can learn through their programs that are essential in becoming a successful
"B":
1. To be successful, you need to learn to overcome your fear of being rejected,
and to stop worrying about what other people will say about you. So many
times I have met people who hold themselves back simply because of what
their friends might say if they did something different. I know because I was
the same way. Coming from a small town, everyone knew what everyone
else was up to. If someone did not like what you were doing, the whole
town heard about it and made your business their business.
One of the best phrases I said over and over to myself was, "What you think
of me is none of my business. What is most important is what I think about
myself."
One of the reasons my rich dad encouraged me to work in sales for Xerox
Corporation for four years was not because he liked copiers, but because he
wanted me to overcome my shyness and fear of rejection.
2. To learn to lead people. Working with different kinds of people is the
hardest thing about business. The people I have met who are successful in
any business are those who are natural leaders. The ability to get along with
and inspire people is a priceless skill. A skill that can be learned.
77
As I said, the transition from the left quadrant to the right quadrant is not so
much what you do, but who you have to become. Learn how to handle rejection,
how not to be affected by what other people think of you, and learn to lead
people and you will find prosperity. So I endorse any network marketing
organization that is first committed to developing you as a human being, more
than developing you into a salesperson. I would seek organizations that:
1. Are proven organizations that have successful track records and a distribution
system and a compensation plan that has been successful for years.
2. Have a business opportunity you can succeed with, believe in and share
confidently with others.
3. Have ongoing, long-term educational programs to develop you as a human
being. Self-confidence is vital on the right side of the Quadrant
4. Have a strong mentor program. You want to learn from leaders, not advisers.
People who are already leaders on the right side of the Quadrant and want
you to succeed.
5. Have people you respect and enjoy being with.
If the organization meets these five criteria, then and only then look at the
product. Too many people look at the product and not the business system and
organization behind the product. In some of the organizations I have looked into,
one of their pitches was, "The product sells itself. It's easy." If you're looking
to be
a salesperson, an "5," then the product is the most important thing. But if you're
developing into a long term "B," then the system, lifelong education, and the
people are more important.
A friend and colleague of mine knowledgeable in this industry reminded me
about the value of time, one of our most precious assets. A true success story in a
network marketing company is when your commitment of time and hard work in
the short term results in significant long-term passive income. Once you have built
a strong organization below you, you can stop working and your revenue stream
will continue from the efforts of the organization you have built. The most
important key to success with a network marketing company is still, however, a
long-term commitment on your part, as well as the organization's part, to mold you
into the business leader you want to become.
A SYSTEM IS A BRIDGE TO FREEDOM
Being homeless was not an experience I want to repeat. Yet, for Kim and me,
the experience was priceless. Today, freedom and security are found not so much
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in what we have, but what we know we can create with confidence.
Since that time we have created or helped develop a real estate company, an
oil company, a mining company, and two education companies. So the process of
learning how to create a successful system was beneficial for us. Yet, I would not
recommend the process to anyone, unless they truly want to go through it.
Until only a few years ago, the possibility of a person becoming successful in
the "B" quadrant was only available to those who were brave or rich. Kim and I
must have been brave because we certainly weren't rich. The reason so many
people stay stuck in the left side of the Quadrant is because they feel the risks
involved in developing their own system are too great. For them, it is smarter to
remain safe and secure in a job.
Today, primarily due to changes in technology, the risk in becoming a
successful business owner has been greatly reduced... and the opportunity to own
your own business system has been made available to virtually everyone.
Franchises and network marketing took away the hard part of developing your
own system. You acquire the rights to a proven system, and then your only job is
to develop your people.
Think of these business systems as bridges. Bridges that will provide a path for
you to cross safely from the left side to the right side of the CASHFLOW
Quadrant... your bridge to financial freedom.
In the next chapter, I will cover the second half of the right side of the
Quadrant, the "I," or investor.
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