The lesson on Capitalism begins with the first chapter of Rich Dad Poor Dad, the lesson, “The Rich Don’t Work For Money.” Simply said, the people who work for money, those in the E and S quadrants, pay the highest percentages in taxes. Those in the B and I quadrants are capitalists. Capitalists do what the government wants done—like creating jobs and affordable housing. Hence they pay the least in taxes. This is true in all Western economy countries.
This difference in taxes will be further clarified in coming sections, because taxes are an important part of a person’s financial education.
Is It Too Late to Change Quadrants?
Question: Does a person need to be young to make the transition from the E and S quadrants to the B and I quadrants?
Answer: No. Colonel Harlan Sanders did not start his journey until after he was retired. At the age of 65, a new freeway bypassed his little chicken shop and his business collapsed. That was when he left the S quadrant and began his Kentucky Fried Chicken franchise in the B and I quadrants. The Colonel’s advantage was that he was pretty good at making chicken in the S quadrant when he started his journey to the B and I quadrants.
The B and I quadrants are demanding, which is why a strong financial education and an early start are important. Many start the journey, but few succeed. Yet for those who do make it, the rewards are immense. Success in the B and I quadrants is like climbing Mount Everest, ascending to the top of the world, the top of the financial food chain. If your child starts preparing early enough, they have a better chance of making it.
Inspiration vs. Motivation
Inspire: The word comes from Latin “ispiratio” meaning “in spirit” or “inspired by god.”
Motivate: The word comes from Latin “motere” meaning “to move.”
The good news is that you do not have to be the smartest person to succeed in the B and I quadrants. You do not have to be an “A” or “B” student, which is more important in the E quadrant and especially the S quadrant. Success in the B and I quadrants is best described as a team sport. All you have to do is surround yourself with smart, trustworthy, hardworking people. And while that may seem simple enough, it is often the toughest challenge of the B and I quadrants.
My Story
In 1969, I graduated from the U.S. Merchant Marine Academy in New York. Since the Vietnam War was on, I volunteered to serve my country rather than begin my career as a merchant ship’s officer, a profession I had prepared for with four years of schooling. I had a great job lined up as an oil tanker officer with Standard Oil, but I knew I had to serve my country.
So in 1969, rather than sail for Standard Oil, I volunteered for military duty as a Marine and went to flight school.
Driving through the gates of the U.S. Navy Flight School at Pensacola, Florida, was the beginning of a great adventure in learning.
High school was a horrible experience for me. The academy was tough and competitive. But flight school was my love affair with learning. No matter how challenging the flight school was, the love of learning never left me. For the first time in my life, I loved being a student.
Learning to love learning is important because education is a process, like the diagram below.
EDUCATIONAL PROCESS
Navy Flight School was truly a process of turning a caterpillar into a butterfly.
Flight school was more than educational. Flight school was transformational. Flight school challenged me mentally, emotionally, physically, and spiritually… and I loved the challenge. That is what education should do… inspire a student to learn more and become more.
I believe one important job of a parent is to find the educational process that brings out your child’s gifts and inspires their love of learning. It might be in music, gardening, medicine, art, or law. For me, it was flight school. As I said, learning to fly renewed my love of learning, just as the game of Monopoly® inspired me to become rich.
Unfortunately, if you motivate externally rather than inspire internally, motivation becomes manipulation.
It is most important that the educational process inspires the child and brings out their genius, rather than punishing them for not doing well on tests and making them feel stupid.
If a child has a strong financial education from home, they can do what they love and still do well financially. Using myself as an example, today I am a teacher. For most teachers, their income comes from the E quadrant. And while most teachers complain about not making enough money, I don’t have that complaint. Why? Because I am a teacher in the B quadrant. Since I am also in the I quadrant, I do not need a paycheck. Most of my money comes from the I quadrant, which is taxed at a much lower rate, often 0%, legally.
Use the Quadrants to Inspire
The lesson for parents is “The quadrant is more important than the profession.”
Much of this book is about the differences in education, skills, and experience that are required to do well in the B and I quadrants. The real question is, “Which quadrant inspires your child the most?”
The E and S quadrants did not inspire me to learn. The B and I quadrants did.
The profession a child chooses makes little difference. I am a teacher—but a teacher in the B and I quadrants, not the E quadrant.
I never dreamed I would be a teacher, I just knew which quadrants I dreamed of.
The same was true for Steve Jobs. If you read his biography, you’ll learn that he did not dream of becoming an employee or self-employed small business owner. His dreams were bigger than that.
Rich Dad Lesson
“It’s not the profession that determines a person’s earning ability. It’s the quadrant.”
My mom and dad were Es, in the employee quadrant. They often said, “The rich pay less in taxes because they’re crooks.” Although they were well educated, their education did not include the study of the quadrants, different types of income, and taxes.
Preparing for the Worst
One reason why people have trouble changing quadrants is because most people choose quadrants out of fear rather than inspiration. For example, most people choose the E quadrant because they fear not having money, a financial fear which causes them to seek job security, benefits, and a steady paycheck.
Many people gravitate to the S quadrant due to a lack of trust. It’s my experience that most S-quadrant people do not trust many people. They want to do their own thing and be their own boss, which is why they often say, “If you want something done right, do it yourself.”
The problem with the S quadrant is that you do not really own a business. You own a job. If you stop working, your income often stops. This means you own a “busy-ness,” not a business.
A business in the B quadrant, on the other hand, continues to generate revenue, whether you work or not.
Training for Life
The reason Kim and I retired at 37 and 47 is because we had income coming in from the B and I quadrants. We had no income from the E or S quadrants.
One reason I loved flight