Rich Dads Before You Quit Your Job: 10 RealLife Lessons Every Entrepreneur Should Know About Building a MultimillionDollar Business

Copyright©2005byRobertT.KiyosakiwithSharonL.Lechter.
Allrightsreserved.
HachetteBookGroup
237ParkAvenue
NewYork,NY10017
Visitourwebsiteatwww.HachetteBookGroup.com.
TheWarnerBooksnameandlogoaretrademarksofHachetteBookGroup,
Inc.
ISBN:978-0-7595-1453-9
FirsteBookEdition:September2005
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Contents

Copyright
Acknowledgments
Introduction
RichDad’sEntrepreneurialLesson#1:ASuccessfulBusinessIsCreated
BeforeThereIsaBusiness.
Chapter1:WhatIstheDifferenceBetweenanEmployeeandan
Entrepreneur?
RichDad’sEntrepreneurialLesson#2:LearnHowtoTurnBadLuck
IntoGoodLuck.
Chapter2:DumbandDumberGetsRichandRicher
RichDad’sEntrepreneurialLesson#3:KnowtheDifferenceBetween
YourJobandYourWork.
Chapter3:WhyWorkforFree?
RichDad’sEntrepreneurialLesson#4:SuccessRevealsYourFailures.
Chapter4:StreetSmartsversusSchoolSmarts

RichDad’sEntrepreneurialLesson#5:TheProcessIsMoreImportant
thantheGoal.


Chapter5:MoneyTalks
RichDad’sEntrepreneurialLesson#6:TheBestAnswersAreFoundin
YourHeart...NotYourHead.
Chapter6:TheThreeKindsofMoney
RichDad’sEntrepreneurialLesson#7:TheScopeoftheMission
DeterminestheProduct.
Chapter7:HowtoGofromSmallBusinesstoBigBusiness
RichDad’sEntrepreneurialLesson#8:DesignaBusinessThatCanDo
SomethingThatNoOtherBusinessCanDo.
Chapter8:WhatIstheJobofaBusinessLeader?
RichDad’sEntreprenuerialLesson#9:Don’tFightfortheBargain
Basement.
Chapter9:HowtoFindGoodCustomers
RichDad’sEntrepreneurialLesson#10:KnowWhentoQuit.
Chapter10:TheSummary
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OtherBestsellingBooksby
RobertT.Kiyosaki&SharonL.Lechter
RichDadPoorDad

WhattheRichTeachTheirKidsAboutMoney
thatthePoorandMiddleClassDoNot
RichDad’sCASHFLOWQuadrant

RichDad’sGuidetoFinancialFreedom
RichDad’sGuidetoInvesting

WhattheRichInvestInthatthePoorandMiddleClassDoNot
RichDad’sRichKidSmartKid

GiveYourChildaFinancialHeadStart
RichDad’sRetireYoungRetireRich

HowtoGetRichQuicklyandStayRichForever
RichDad’sProphecy

WhytheBiggestStockMarketCrashinHistoryisStillComing...
AndHowYouCanPrepareYourselfandProfitfromit!
RichDad’sSuccessStories

Real-LifeSuccessStoriesfromReal-LifePeople
WhoFollowedtheRichDadLessons
RichDad’sGuidetoBecomingRichWithoutCuttingUpYourCreditCards

Turn“BadDebt”into“GoodDebt”
RichDad’sWhoTookMyMoney?

WhySlowInvestorsLoseandFastMoneyWins!
RichDadPoorDadforTeens

TheSecretsAboutMoney—ThatYouDon’tLearnInSchool!
RichDad’sEscapefromtheRatRace

HowtoBecomeaRichKidbyFollowingRichDad’sAdvice

BeforeYouQuitYourJob

10Real-LifeLessonsEveryEntrepreneurShouldKnow
AboutBuildingaMultimillion-DollarBusiness


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Acknowledgments

Entrepreneurship is as much a spirit as it is a vocation. When Rich Dad
partneredwithWarnerBooksitwasinlargepartduetoLaurenceKirshbaum,
Warner’sCEOandChairman.Werecognizedthatentrepreneurialsparkinhis
eyes.Heenergizedhis“CanDo”attitudethroughouttheentireorganization.
While publishing may not be a cutting-edge industry, Larry Kirshbaum is a
cutting-edgeleaderandhasbeenajoytoworkwith.Thankyou,Larry.
RobertKiyosaki
SharonLechter
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Introduction

WhatMakesEntrepreneursDifferent?
One of the most frightening days of my life was the day I quit my job and
officially became an entrepreneur. On that day I knew there were no more
steadypaychecks,nomorehealthinsuranceorretirementplan.Nomoredays
offforbeingsickorpaidvacations.
On that day, my income went to zero. The terror of not having a steady

paycheckwasoneofthemostfrighteningexperiencesIhadeverexperienced.
Worstofall,IdidnotknowhowlongitwouldbebeforeIwouldhaveanother
steadypaycheck...itmightbeyears.ThemomentIquitmyjobIknewthe
real reason why many employees do not become entrepreneurs. It is fear of
not having any money . . . no guaranteed income . . . no steady paycheck.
Very few people can operate for long periods of time without money.
Entrepreneurs are different, and one of those differences is the ability to
operatesanelyandintelligentlywithoutmoney.
Onthatsameday,myexpenseswentup.Asanentrepreneur,Ihadtorent
anoffice,aparkingstall,awarehouse,buyadesk,alamp,rentaphone,pay
for travel, hotels, taxis, meals, copies, pens, paper, staples, stationery, legal
tablets,postage,brochures,products,andevencoffeefortheoffice.Ialsohad
to hire a secretary, an accountant, an attorney, a bookkeeper, a business
insurance agent, and even a janitorial service. These were all expenses my
employerhadoncepaidforme.Ibegantorealizehowexpensiveithadbeen
tohiremeasanemployee.Irealizedthatemployeescostfarmorethanthe
numberofdollarsreflectedintheirpaychecks.
So another difference between employees and entrepreneurs is that
entrepreneursneedtoknowhowtospendmoney,eveniftheyhavenomoney.


TheStartofaNewLife
ThedayIofficiallyleftthecompany,IwasinSanJuan,PuertoRico.Itwas
June 1978. I was in Puerto Rico because I was attending the Xerox
Corporation’s President’s Club celebration, an event recognizing the top
achievers in the company. People had come from all over the world to be
recognized.
It was a great event, a gala I will always remember. I could not believe
howmuchmoneyXeroxwasspendingjusttorecognizethetopsalespeoplein
thecompany.Buteventhoughitwasacelebration,Iwashavingamiserable

time.Throughoutthethree-dayevent,allIcouldthinkaboutwasleavingthe
job,thesteadypaycheck,andthesecurityofthecompany.Irealizedthatonce
thepartyinSanJuanwasover,Iwasgoingtogoonmyown.Iwasnotgoing
backtoworkattheHonoluluBranchOfficeortheXeroxCorporation.
When leaving San Juan, the plane I was on experienced some kind of
emergency. In preparing to land at Miami, the pilot had us all brace, cradle
ourheads,andprepareforapossiblecrash.Iwasalreadyfeelingbadenough
aboutthisbeingmyfirstdayasanentrepreneur,butnowIhadtoprepareto
dieontopofit?Myfirstdayasanentrepreneurwasnotofftoaverygood
start.
Obviously,theplanedidnotcrash,andIflewontoChicagowhereIwas
goingtodoasalespresentationformylineofnylonsurferwallets.Iarrived
attheChicagoMercantileMartlatebecauseoftheflightdelays,andtheclient
Iwassupposedtomeet,abuyerfromalargechainofdepartmentstores,was
alreadygone.OnceagainIthoughttomyself,“Thisisnotagoodwaytostart
mynewcareerasanentrepreneur.IfIdon’tmakethissaletherewillbeno
incomeforthebusiness,nopaycheckforme,nofoodonthetable.”SinceI
liketoeat,havingnofooddisturbedmethemost.

AreSomePeopleBornEntrepreneurs?
“Are people born entrepreneurs or are they trained to be entrepreneurs?”
When I asked my rich dad his opinion on this age-old question, he said,
“Asking if people are born or trained to be entrepreneurs is a question that
makes no sense. It would be like asking if people are born employees or
trained to become employees?” He went on to say, “People are trainable.
Theycanbetrainedtobeeitheremployeesorentrepreneurs.Thereasonthere
aremoreemployeesthanentrepreneursissimplythatourschoolstrainyoung
peopletobecomeemployees.Thatiswhysomanyparentssaytotheirchild,

‘Gotoschoolsoyoucangetagoodjob.’Ihaveyettohearanyparentsay,
‘Gotoschooltobecomeanentrepreneur.’”

EmployeesAreaNewPhenomenon
The employee is a rather new phenomenon. During the agrarian age, most
peoplewereentrepreneurs.Manywerefarmerswhoworkedtheking’slands.
Theydidnotreceiveapaycheckfromtheking.Infact,itwastheotherway
around. The farmer paid the king a tax for the right to use the land. Those
who were not farmers were tradespeople, aka small business entrepreneurs.
They were butchers, bakers, and candlestick makers. Their last names often
reflectedtheirbusiness.ThatiswhytodaymanypeoplearenamedSmith,for
the village blacksmith; Baker, for bakery owners; and Farmer, because their
family’s business was farming. They were entrepreneurs, not employees.
Most children who were raised in entrepreneurial families followed in their
parents’ footsteps, also becoming entrepreneurs. Again, it is just a matter of
training.
ItwasduringtheIndustrialAgethatthedemandforemployeesgrew.In
response,thegovernmenttookoverthetaskofmasseducationandadopted
the Prussian system, upon which most Western school systems in the world
are today modeled. When you research the philosophy behind Prussian
education,youwillfindthatthestatedpurposewastoproducesoldiersand
employees...peoplewhowouldfollowordersanddoastheyweretold.The
Prussiansystemofeducationisagreatsystemformass-producingemployees.
Itisamatteroftraining.

TheMostFamousEntrepreneurs
Youmayalsohavenoticedthatmanyofourmostfamousentrepreneursdid
notfinishschool.SomeofthoseentrepreneursareThomasEdison,founderof
General Electric; Henry Ford, founder of Ford Motor Company; Bill Gates,
founder of Microsoft; Richard Branson, founder of Virgin; Michael Dell,

founder of Dell Computers; Steven Jobs, founder of Apple Computers and
Pixar; and Ted Turner, founder of CNN. Obviously, there are other
entrepreneurswhodidwellinschool...butfewareasfamousasthese.


TheTransitionfromEmployeetoEntrepreneur
IknowIwasnotbornanaturalentrepreneur.Ihadtobetrained.Myrichdad
guided me through a process of starting as an employee to eventually
becominganentrepreneur.Forme,itwasnotaneasyprocess.Therewasalot
IhadtounlearnbeforeIcouldbegintounderstandthelessonshewastrying
toteachme.
Itwasdifficulthearingwhatmyrichdadhadtosaybecausewhathesaid
was exactly opposite from the lessons my poor dad was trying to teach me.
Everytimemyrichdadtalkedaboutentrepreneurship,hewastalkingabout
freedom.Everytimemypoordadtalkedtomeaboutgoingtoschooltogeta
job, he was talking about security. There was the clash of these two
philosophiesgoingoninmyheadanditwasconfusingme.
Finally I asked rich dad about the difference in philosophies. I asked,
“Aren’tsecurityandfreedomthesamething?”
Smiling, he replied, “Security and freedom are not the same . . . in fact
they are opposites. The more security you seek, the less freedom you have.
The people with the most security are in jail. That is why it is called
maximumsecurity.”Hewentontosay,“Ifyouwantfreedomyouneedtolet
goofsecurity.Employeesdesiresecurityandentrepreneursseekfreedom.”
So the question is, can anyone become an entrepreneur? My answer is,
“Yes.Itbeginswithachangeinphilosophy.Itbeginswithadesireformore
freedomthansecurity.”

FromCaterpillartoButterfly
We all know that a caterpillar spins a cocoon and one day emerges as

butterfly.Itisachangesoprofound,itisknownasametamorphosis.Oneof
the definitions of metamorphosis is a striking alteration in character. This
book is about a similar metamorphosis. This book is about the changes a
person goes through, when transitioning from employee to entrepreneur.
While many people dream of quitting their job and starting their own
business, only a few actually do it. Why? Because the transition from
employee to entrepreneur is more than changing jobs . . . it is a true
metamorphosis.

EntrepreneurBooksWrittenbyNonentrepreneurs


Over the years, I have read many books about entrepreneurs and on the
subject of entrepreneurship. I studied the lives of such entrepreneurs as
Thomas Edison, Bill Gates, Richard Branson, and Henry Ford. I also read
books on different entrepreneurial philosophies and what makes some
entrepreneurs better than others. In every book, good or bad, I found some
priceless bit of information or wisdom that has helped me in my quest to
becomeabetterentrepreneur.
Looking back at the books I have read, I noticed that they fall into two
basic categories: books written by entrepreneurs and books written by
nonentrepreneurs.Mostofthebooksarewrittenbynonentrepreneurs,people
whoareprofessionalauthors,journalists,orcollegeprofessors.
WhileIhavegottensomethingimportantfromeverybook,regardlessof
who wrote it, I did find something missing. What I found missing was the
“down in the gutter,” “kick in the gut,” “stabbed in the back,” terrifying
mistakesandhorrorstoriesthatalmosteveryentrepreneurgoesthrough.Most
of the books paint a picture of the entrepreneur as a brilliant, suave, cool
businessperson who handled every challenge with ease. The books about
great entrepreneurs often make it sound like they were born entrepreneurs,

andgranted,manyofthemwere.Justastherearenaturalandgiftedathletes,
therearenaturalandgiftedentrepreneurs,andmostbooksarewrittenabout
suchpeople.
Booksonentrepreneurshipwrittenbycollegeprofessorshaveadifferent
flavor.Collegeprofessorstendtoboilthesubjecttothebone,leavingonlythe
staticfactsorfindings.Ifindreadingsuchtechnicallycorrectbooksdifficult
becausethereadingisoftenboring.Thereisnomeatleft,nothingjuicy,just
thebones.


HowThisBookIsDifferent
This is a book about entrepreneurship, written by entrepreneurs who have
experiencedtheupsanddowns,thesuccessesandfailures,oftherealworld.
TodayTheRichDadCompanyisaninternationalbusinesswithproducts
inforty-fourdifferentlanguages,doingbusinessinovereightycountries.But
itallstartedasacompanythatmywife,Kim,andIstartedwithourpartner
Sharon Lechter. It began on Sharon’s dining room table in 1997. Our initial
investmentwas$1,500.Ourfirstbook,RichDadPoorDad,hasbeenonthe
New York Times Best Seller List for over four and a half years, an
accomplishment shared by only three other books. Maybe, as you read this
book,itwillstillbeonthelist.
Rather than tell you how smart I am at business, which I am not, we
thoughtitbettertowriteadifferenttypeofbookonentrepreneurship.Rather
thantellyouhowIbrilliantlysailedoverthetallestpeaks,andmademillions,
wethoughtyoumightlearnmorefromhowIdugmanydeepholes,fellinto
them, and then had to dig my way out. Rather than tell you about all my
successes,webelieveyouwilllearnmorefrommyfailures.

WhyWriteaboutFailures?
Manypeopledonotbecomeentrepreneursbecausetheyareafraidoffailing.

Bywritingaboutthethingsmanypeopleareafraidof,wehopetohelpyou
better decide if becoming an entrepreneur is for you. Our intent is not to
frightenyouoff—ourintentistoprovidealittle“realworld”insightonthe
upsanddownsoftheprocessofbecominganentrepreneur.
Anotherreasonforwritingaboutfailuresisthathumansaredesignedto
learn by making mistakes. We learn to walk by first falling down and then
tryingagain.Welearntorideabicyclebyfallingoffandthentryingagain.If
we had never risked falling, we would go through life crawling like
caterpillars.Oneofthemissingelementswehavefoundinreadingmanyof
the books about entrepreneurship, especially those written by college
professors,isthattheydonotgointotheemotionaltrialsandtribulationsan
entrepreneur goes through. They do not discuss what happens to
entrepreneurs emotionally when the business fails, when they run out of
money,havetoletemployeesgo,andwhentheirinvestorsandcreditorscome


after them. How would most college professors know how a failing
entrepreneurfeels?Howwouldtheyknow—sinceasteadypaycheck,tenure,
always knowing the right answers, and never making mistakes are highly
prizedintheacademicworld.Again,it’sallamatteroftraining.
In the late 1980s, I was invited to do a talk on entrepreneurship at
ColumbiaUniversity.Ratherthantalkaboutmysuccesses,Italkedaboutmy
failures and how much I learned from my mistakes. The young audience
askedalotofquestionsandseemedgenuinelyinterestedintheupsanddowns
of becoming an entrepreneur. I talked about the fears we all face when
startingabusiness,andhowIfacedthosefears.Isharedwiththemsomeof
the more stupid mistakes I made and how those mistakes later became
valuablelessonsIwouldneverhavelearnedifIhadnotmadethemistakes.I
talked about the pain of having to shut a business down and lay people off
because of my incompetence. I also shared with them how all my mistakes

eventually made me a better entrepreneur, very rich, and most important,
financially free, never needing a job again. All in all, I thought it was an
objectiveandrealistictalkontheprocessofbecominganentrepreneur.
Afewweekslater,Ifoundoutthatthefacultymemberwhohadinvited
metospeakattheuniversitywascalledintoherdepartmenthead’sofficeand
reprimanded.Hisfinalwordstoherwere,“Wedonotallowfailurestospeak
atColumbia.”

WhatIsanEntrepreneur?
Nowthatwehavetornintocollegeprofessors,itistimetogivethemsome
credit. One of the better definitions of an entrepreneur is from Howard H.
Stevenson, a professor at Harvard University. He says, “Entrepreneurship is
an approach to management that we define as follows: the pursuit of
opportunitywithoutregardtoresourcescurrentlycontrolled.”Inmyopinion,
this is one of the most brilliant definitions of what an entrepreneur is. It is
barebones...andbrilliant.

ThePowerofExcuses
Manypeoplewanttobecomeentrepreneursbutalwayshavesomeexcusefor
whytheydonotquittheirjob,excusessuchas:


1. “Idon’thavethemoney.”
2. “Ican’tquitmyjobbecauseIhavekidstosupport.”
3. “Idon’thaveanycontacts.”
4. “I’mnotsmartenough.”
5. “Idon’thavethetime.I’mtoobusy.”
6. “Ican’tfindanyonewhowantstohelpme.”
7. “Ittakestoolongtobuildabusiness.”
8. “I’mafraid.Buildingabusinessistooriskyfor

me.”
9. “Idon’tlikedealingwithemployees.”
10. “I’mtooold.”
ThefriendwhogavemethisarticlebyProfessorStevensonsaid,“Anytwoyear-oldisanexpertatmakingexcuses.”Healsosaid,“Thereasonmost
peoplewhowanttobecomeentrepreneursremainemployeesisthattheyhave
someexcusethatkeepsthemfromquittingtheirjobandtakingthatleapof
faith.Formanypeople,thepoweroftheirexcuseismorepowerfulthantheir
dreams.”

EntrepreneursAreDifferent
Mr.Stevensonhadmanyotherbarebonegemsinhisarticle,especiallywhen
hecomparesentrepreneurstoemployeesorpromoterstotrustees,ashelabels
them.Afewofthesegemsofcomparisonare:
1.WhenitcomestotheirStrategicOrientation:
PROMOTER:drivenbyperceptionofopportunity.
TRUSTEE:drivenbycontrolofresources.
Inotherwords,entrepreneursarealwayslookingfortheopportunity
withoutmuchregardtowhethertheyhaveresources.Employeetypepersons
focusonwhatresourcestheyhaveordonothave,whichiswhysomany
peoplesay,“HowcanIstartmybusiness?Idon’thavethemoney.”An
entrepreneurwouldsay,“Tieupthedealandthenwe’llfindthemoney.”This


differenceinphilosophiesisaverybigdifferencebetweenemployeeand
entrepreneur.
This is also why my poor dad often said, “I can’t afford it.” Being an
employeehelookedathisresources.Thoseofyouwhohavereadmyother
books know that my rich dad forbade his son and me to ever say, “I can’t
affordit.”Insteadhetaughtustolookatopportunitiesandask,“HowcanI
affordit?”Hewasanentrepreneur.

2.WhenitcomestoManagementStructure:
PROMOTER:Flatwithmultipleinformalnetworks.
TRUSTEE:Formalizedhierarchywithmultipletiers.
Inotherwords,anentrepreneurwillkeeptheorganizationsmallandlean,
usingcooperativerelationshipswithstrategicpartnerstogrowthebusiness.
Employeeswanttobuildahierarchy,whichmeansachainofcommand,with
thematthetop.Thisistheirconceptofbuildinganempire.Anentrepreneur
willgrowtheorganizationhorizontally,whichmeans“outsourcing”rather
thanbringingthework“inhouse.”Anemployeewantstogrowthe
organizationvertically,whichmeanshiringmoreemployees.Formal
organizationalchartsareveryimportanttoemployeesclimbingthecorporate
ladder.
Inthisbook,youwillfindouthowTheRichDadCompanystayedsmall
yetgrewbigbyusingstrongstrategicpartnershipswithlargehierarchiessuch
as Time Warner, Time Life, Infinity Broadcasting, and major publishers
throughouttheworld.Wedecidedtogrowinthismannerbecauseitcostus
less time, people, and money. We could grow faster, grow bigger, become
veryprofitable,haveaglobalpresence,andyetremainsmall.Weusedother
people’s money and resources to grow the business. This book will explain
howandwhywediditthatway.
3.WhenitcomestoRewardPhilosophy:
PROMOTER:Valuedriven,performance-based,team-oriented.
TRUSTEE:Securitydriven,resource-based,jobpromotion-oriented.
Insimpleterms,employeeswantjobsecuritywithastrongcompany,a
steadypaycheck,andtheopportunityforpromotion—achancetoclimbthe
corporateladder.Manyemployeesconsiderapromotionandtitlemore
importantthanmoney.Iknowmypoordaddid.Helovedhistitle,
SuperintendentofPublicEducation,eventhoughhewasnotpaidmuch.

The entrepreneur doesn’t want to climb the corporate ladder; he or she
wants to own the corporate ladder. An entrepreneur is not driven by a
paycheckbutbyresultsoftheteam.Also,asHowardStevensonstates,many
entrepreneurs start a business because they have very strong values, values
thataremoreimportantthansimplyjobsecurityandasteadypaycheck.This
book will go into values far more important than money. For many
entrepreneurs, their values are more important than money. They are
passionate about their work, their mission, and love what they do. Many
entrepreneurs will do their work even though there is no money. Rich dad
said,“Manyemployeesarepassionateabouttheirworkonlyaslongasthere
isapaycheck.”
Inthisbook,youwillalsolearnaboutthethreedifferenttypesofmoney;
competitive money, cooperative money, and spiritual money. Competitive
money is the type of money most people work for. They compete for jobs,
promotions, pay raises, and against their business competition. Cooperative
moneyisachievedbynetworkinginsteadofcompeting.Inthisbookyouwill
alsofindouthowTheRichDadCompanyexpandedrapidlywithverylittle
money,simplybyworkingforcooperativemoney.Also,asignificantpartof
thisbookisdedicatedtothemissionofabusiness,thevalues.Whileweall
knowthattherearemanyentrepreneurswhoareopportunists,workingonly
for competitive money, there are others who build a business on a strong
mission,workingforspiritualmoney—thebestofallmoney.

DifferentStylesofManagement
Therearetwootherpointsinthearticlethatarerefreshing,especiallyfroma
collegeprofessor.HowardStevensonacknowledgesthatmanypeoplesaythat
entrepreneursarenotgoodmanagers.Insteadofagreeingwiththiscommonly
accepted point of view, he writes, “The entrepreneur is stereotyped as
egocentricandidiosyncraticandthusunabletomanage.However,although
the managerial task is substantially different for the entrepreneur, the

management skill is nonetheless essential.” Right-on, Howard. In other
words,entrepreneursmanagepeopledifferently.Thenextpointexplainswhy
there are differences in management style between entrepreneur and
employee.

KnowHowtoUseOtherPeople’sResources


The other point Stevenson makes tracks closely his definition of an
entrepreneur,whichis,“Entrepreneurshipisanapproachtomanagementthat
wedefineasfollows:thepursuitofopportunitywithoutregardtoresources
currently controlled.” He states, “Entrepreneurs learn to use other people’s
resources well.” This is what causes the difference in management style.
Employees want to hire people so they can manage them. It puts them in
directcontroloverthem.Theywilldoastheyaretoldortheyarefired.This
is why employee types want to build vertical hierarchies. They want the
Prussian style of management. They want people to jump when they say,
“Jump.”
Sinceentrepreneursarenotnecessarilymanagingemployees,theyneedto
managepeopledifferently.Verysimplyput,entrepreneursneedtoknowhow
tomanageotherentrepreneurs.Ifyousay,“Jump,”toanentrepreneur,heor
she usually responds with some rude comment or gesture. So entrepreneurs
are not poor managers, as many people think; they simply have a very
differentmanagementstylebecausetheyaremanagingpeopletheycannottell
whattodo...orfire.
This difference in management style also explains why employee types
workforcompetitivemoney and entrepreneurs tend to work for cooperative
money.

EmployeeLookingforEmployees

Someofthemorecommoncomplaintsheardfromnewentrepreneursare,“I
can’t find good employees.” Or, “Employees just don’t want to work.” Or,
“All employees want is more money.” This is a problem for a new
entrepreneur with a confused management style. Management style is a
matter of training. Again, compliments to Howard Stevenson, a college
professor,forgettingtothebarebonesdifferencesbetweenentrepreneurand
employee.

HowtoOrdertheArticle
ThereismuchmoreinformationpackedintoHowardH.Stevenson’s
articleentitled,“APerspectiveonEntrepreneurship,”writtenin1983.
AcopyofthearticleisavailablefromHarvardBusinessSchoolfor


lessthan$10.00.Toordergotohttp:/harvardbusinessonline.org.Itisa
brilliantarticle,andusefulforanyonewhoisinterestedinthesubject
ofentrepreneurship.

Don’tWaittillAllLightsAreGreen
Anotherreasonmanypeoplearenotassuccessfulastheywouldliketobeis
fear—oftenthefearofmakingmistakesorthefearoffailing.Thereisanother
reason, also a fear, but it appears a little differently. These people disguise
theirfearsbybeingperfectionists.Theyarewaitingforallthestarstolineup
beforestartingtheirbusiness.Theywantallthelightstobegreenbeforethey
will pull out of the driveway. When it comes to entrepreneurship, many of
thesepeoplearestillstuckinthedrivewaywiththeirengineidling.

ThreePartsofaBusiness
One of the best entrepreneurs I have ever known is a friend and business
partnerofmine.Ihaveformedseveralcompanieswithhim—threethatwent

public and have made us multimillions. In describing what an entrepreneur
does,hesaid,“Therearethreepartstoputtingabusinessdealtogether.Oneis
finding the right people. Two is finding the right opportunity. And three is
findingthemoney.”Healsosaid,“Rarelydoallthreepiecescometogetherat
thesametime.Sometimesyouhavethepeople,butyoudonothavethedeal
orthemoney.Sometimesyouhavethemoney,butnodealorpeople.”Healso
said,“Themostimportantjobofanentrepreneuristograbonepieceandthen
begin to put the other two pieces together. That may take a week or it may
takeyears,butifyouhaveonepiece,atleastyou’vegottenstarted.”Inother
words,anentrepreneurdoesnotcareiftwooutofthreelightsarered.Infact,
an entrepreneur does not care if all three lights are red. Red lights do not
preventanentrepreneurfrombeinganentrepreneur.

AnythingWorthDoingIsWorthDoingPoorly
Haveyouevernoticedthatsoftware,suchasMicrosoft’sWindows,comesin
versionssuchasWindows2.0andWindows3.0?Whatthatmeansisthatthey
haveimprovedtheirproductandnowwantyoutobuythebetterversion.In


otherwords,thefirstproducttheysoldyouwasnotperfect.Theymayhave
solditknowingithadflaws,bugs,andneededtobeimproved.
Manypeoplefailtogettomarketbecausetheyareconstantlyperfecting
their product. Like the person who is waiting for all the lights to be green,
some entrepreneurs never get to market because they are looking for, or
workingon,perfectingtheirproductorwritingtheperfectbusinessplan.My
rich dad often said, “Anything worth doing is worth doing poorly.” Henry
Fordsaid,“ThankGodformycustomers.Theybuymyproductsbeforethey
are perfected.” In other words, entrepreneurs start and continue to improve
themselves, their businesses, and their products. Many people will not start
unlesseverythingisperfect.Thatiswhymanyofthemneverstart.

Knowingwhentointroduceaproductintothemarketplaceisasmuchan
artasascience.Youmaynotwanttowaitforaproducttobeperfect;itmay
neverbeperfect.Itjusthastobe“goodenough.”Itmerelyhastoworkwell
enough to be accepted in the marketplace. However, if the product is so
flawed that it doesn’t work for its intended purpose, or otherwise does not
meetmarketplaceexpectationsorcausesproblems,itcanbeverydifficultto
reestablishcredibilityandareputationforquality.
Oneofthemarksofasuccessfulentrepreneurisbeingabletoassessthe
expectationsofthemarketplaceandknowwhentostopdevelopingandstart
marketing. If the product is put on the market a little prematurely, then the
entrepreneurcansimplyimproveit,andtakestepstomaintainthegoodwillin
themarketplace.Ontheotherhand,delayinintroducingaproductcanmean
opportunitiesirretrievablylost,awindowofopportunitymissed.
For those of you who remember the early versions of Windows, you’ll
recallhowfrequentlyyourcomputer“crashed.”(Thereweresomewhosaid
that Windows was so full of bugs that it should have come with a can of
insecticide.) If an automobile broke down as frequently as Windows did, it
would not have been acceptable in the marketplace. In fact, the automobile
wouldhavebeena“lemon,”andthemanufacturerwouldhavebeenforcedto
replace it. Windows, however, notwithstanding the bugs—the flaws—was
phenomenally successful. Why was that? It filled a need in the marketplace
andwasnotoutoflinewithmarketplaceexpectations.Microsoftrecognizeda
window of opportunity and started marketing. As those of you who use the
presentversionofWindowsknow,ifMicrosofthadwaitedforWindowstobe
perfect,itstillwouldnotbeinthemarketplace.

StreetSmartsVersusSchoolSmarts


Inmartialarts,thereisasayingthatgoes,“Acupthatisfullisuseless.Only

whenacupisemptyisituseful.”Thisistruefortheentrepreneur.
We have all heard people say, “Oh, I know all about that.” Those are
wordscomingfromapersonwhosecupisfull.Thosearethewordscoming
fromapersonwhobelievesheorsheknowsalltheanswers.Anentrepreneur
cannot afford to know all the answers. Entrepreneurs know they can never
know all the answers. They know their success requires that their cup is
alwaysempty.
Tobesuccessfulasemployees,peopleneedtoknowtherightanswers.If
they do not know the right answers, they may be fired or not promoted.
Entrepreneursdonotneedtoknowalltheanswers.Alltheyneedtoknowis
whotocall.Thatiswhatadvisorsareallabout.
Employeesareoftentrainedtobespecialists.Simplysaid,aspecialistis
someonewhoknowsalotaboutalittle.Hisorhercupmustbefull.
Entrepreneursneedtobegeneralists.Simplysaid,ageneralistissomeone
whoknowsalittleaboutalot.Hisorhercupisempty.
Peoplegotoschooltobecomespecialists.Peoplegotoschooltobecome
an accountant, attorney, secretary, nurse, doctor, engineer, or computer
programmer. These are people who know a lot about a little. The more
specializedpeopleare,themoremoneytheymake—oratleasttheyhopethey
make.
Whatmakesanentrepreneurdifferentisentrepreneursmustknowalittle
aboutaccounting,thelaw,engineeringsystems,businesssystems,insurance,
productdesign,finance,investing,people,sales,marketing,publicspeaking,
raising capital, and dealing with different people trained in different
specialties.Trueentrepreneursknowthereissomuchtoknowandsomuch
theydonotknow,theycannotaffordtheluxuryofspecialization.Thatiswhy
theircupmustalwaysbeempty.Theymustalwaysbelearning.

NoGraduationDay
Thismeanstheentrepreneurmustbeaveryproactivelearner.OnceIcrossed

thelinefromemployeetoentrepreneur,myrealeducationbegan.Iwassoon
reading every book on business I could get my hands on, reading financial
newspapers,andattendingseminars.IknewIdidnotknowalltheanswers.I
knewIhadtolearnalotandlearnitfast.Today,nothinghaschanged.Iknow
thatmyeducationasanentrepreneurwillneverhaveagraduationday.Iwill
alwaysbeinschool.Inotherwords,whenIwasnotatwork,Iwasreadingor
studying,andthenapplyingwhatIlearnedtothebusiness.


Overtheyears,thisconstantstudyandthenapplicationtothebusinesshas
been one of my most important habits for success. As I said, I was not a
naturalentrepreneur,assomeofmyfriendswere.Butasintheracebetween
theturtleandthehare,Itheturtleslowlybutsurelycaughtupwithandpassed
someofmyfriendswhosecupsbecamefullwhentheyachievedsuccess.A
trueentrepreneurhasnograduationday.

Overspecialized
The following diagram comes from Rich Dad’s CASHFLOW Quadrant
(WarnerBooks),thesecondbookintheRichDadseries.

TheEstandsforEmployee.
TheSstandsforSelf-employed,smallbusiness,orspecialist.
TheBstandsforBigbusinessowner(fivehundredemployeesormore).
TheIstandsforInvestor.
OneofthereasonssomanyentrepreneursareintheSquadrantratherthan
the B quadrant is that they are overly specialized. For example, medical
doctorsinprivatepracticearetechnicallyentrepreneursbutmayfindithard
tomigratefromtheSquadranttotheBquadrantbecausetheirtrainingistoo
specialized—their cup is full. For a person to move from S to B, he or she
willneedmoregeneralizedtraining—andmustalwayshaveanemptycup.

AsidenoteontheCASHFLOWQuadrant.Oneofthereasonswhyrich
dadrecommendedIbecomeanentrepreneurintheBandIquadrantsisthat
the tax laws are most favorable in those quadrants. The tax laws are notas
favorableforemployeesorself-employedpeople,theEandSquadrants.The
taxcodeoffersgreaterincentives,i.e.,loopholes,forpeoplewhoeitherhirea
lot of people in the B quadrant or invest in projects the government wants
growth in, investments such as low-income housing. In summary, taxes are
differentindifferentquadrants.
This book will go into the differences in each quadrant and how an
entrepreneurcanmigratefromonequadranttoanother,especiallyfromtheS


quadranttotheBquadrant.

AListofDifferences
Before quitting their jobs, people need to decide if they want to make the
transition from employee to entrepreneur. The transition or metamorphosis
requiresachangetosomeofthefollowingtraits.

1. Abilitytochangephilosophyfromsecurityto
freedom
2. Abilitytooperatewithoutmoney
3. Abilitytooperatewithoutsecurity
4. Abilitytofocusonopportunityratherthan
resources
5. Havingdifferentmanagementstylestomanage
differentpeople
6. Abilitytomanagepeopleandresourcestheydonot
control
7. Teamandvalueorientedratherthanpayor

promotionoriented
8. Activelearner—nograduationday
9. Generalizededucationratherthanspecialized
10. Thecouragetoberesponsiblefortheentire
business
Youmaynoticethatfarmers,possiblyourearliestentrepreneurs,havehad
todevelopmostofthesetraitsinordertosurviveasfarmers.Mosthadto
plantinthespringinordertoharvestinthefall.Mosthadtopraytheweather
wasintheirfavorandthatpests,diseases,andinsectsleftenoughforthe
farmer’sfamilytoliveonthroughalonghardwinter.Richdadoftensaid,“If
youhavethemind-setandtoughnessofafarmer,youwillbeagreat
entrepreneur.”


ThePotofGoldattheEndoftheRainbow
Whilethisbookstartsoffdescribingtheprocessofbecominganentrepreneur
as a painful and time-consuming process, I also want to let you know that
thereisapotofgoldattheendoftherainbow.Aswithanylearningprocess,
evenlearningtowalkorrideabicycle,thestartoftheprocessisalwaysthe
hardest. You may recall my first official day as an entrepreneur was not a
goodday.Ifyoustickwiththelearningprocess,yourworldwillchange,just
asyourworldchangedwhenyoufinallylearnedtowalkorrideabike.The
sameistruewithentrepreneurship.
Forme,thepotofgoldattheendoftherainbowhasbeengreaterthanmy
wildest dreams. The process of becoming an entrepreneur has made me far
richer than I could have become as an employee. Also, I have become
somewhat famous and recognized throughout the world. I doubt if I would
have become famous as an employee. Most important, our products have
reached people throughout the world and in some way helped them make
their lives a little better. The best part of learning to be an entrepreneur is

beingabletoservemoreandmorepeople.Beingabletoservemorepeople
hasbeenmyprimaryreasonforbecominganentrepreneur.

ThePhilosophyofanEntrepreneur
Becominganentrepreneurbeganwithachangeofphilosophy.ThedayIleft
the Xerox Corporation in Puerto Rico, my philosophy shifted from the
philosophyofmypoordadtothephilosophyofmyrichdad.
Theshiftlookedlikethis:

1. Fromadesireforsecuritytoadesireforfreedom
2. Fromadesireforasteadypaychecktothedesire
forgreatwealth
3. Fromseeingvalueindependencetoseeingvaluein
independence
4. Tomakemyownrulesratherthanobeysomeone
else’srules
5. Adesiretogiveordersratherthantakeorders


6. Awillingnesstobefullyresponsibleratherthansay,
“It’snotmyjob”
7. Todeterminethecultureofacompanyratherthan
trytofitintosomeoneelse’scompanyculture
8. Tomakeadifferenceinthisworldratherthan
complainabouttheproblemsoftheworld
9. Toknowhowtofindaproblemandturnitintoa
businessopportunity
10. Tochoosetobeanentrepreneurratherthanan
employee
TheNewSuperEntrepreneurs

In 1989 the world went through perhaps the biggest change in history. In
1989,theBerlinWallcamedownandtheInternetwentup.In1989theCold
Warendedandglobalizationstartedtotakeoff.Theworldwentfromwallsto
Web,fromdivisiontointegration.
In his bestselling book The World Is Flat (Farrar, Straus and Giroux,
2005),ThomasFriedmanstatesthatwhenthewallcamedownandtheWeb
wentup,theworldwenttooneSuperPower(theU.S.),globalSuperMarkets,
andSuperIndividuals.
Unfortunately, one such super individual is Osama Bin Laden. Quoting
ThomasFriedman:
OsamaBinLadendeclaredwarontheUnitedStatesinthelate1990s.
AfterheorganizedthebombingoftwoAmericanembassiesinAfrica,
theU.S.AirForceretaliatedwithacruisemissileattackonhisbases
inAfghanistanasthoughhewereanothernation-state.Thinkofthat:
on one day in 1998, the United States fired 75 cruise missiles, at $1
millionapiece,ataperson!Thatwasthefirstbattleinhistorybetween
asuperpowerandasuper-empoweredangryman.September11was
justthesecondsuchbattle.
My prediction is there will soon be new Super Entrepreneurs whose wealth
will dwarf the wealth of today’s mega-rich entrepreneurs. In the 1980s, Bill