There was an important diagram my rich dad showed me when I was a little boy. It was a diagram known as the Cash Flow Quadrant. And the Quadrant is made of four different people who make of the business world.
So my rich dad said, “In the business world there are Es and E stands for employees. And the employees, you can always tell who they are by their core values. An employee with the president, the generator of the company, will always say the same words. The words are, “I’m looking for a safe, secure job with benefits.” That’s what makes them employees because their core value is security.”
The other one of the four is the S for the small business owner or the self-employed and again their core values will cause them to use the same words which are, “If you want it done right, do it by yourself.” S means they are also solo. Generally one person act, they operate by themselves.
On the right side of the Cash Flow Quadrant are the Bs. And my rich dad said, “the B stood for big business, or like Bill Gates. For Bs define big business as 500 employees or more. And their words are different.
They’ll say, “I’m looking for good system, good network, and the smartest people I know to help run my business.” Unlike the S, they don’t want to run the company by themselves. They want smart people run the company for them.”
And then, the fourth of the Cash Flow Quadrant is the I. And the I stands for the investor. These are people who have money work hard for them. These people in the B Quadrant have people work hard for them. And these people in the E & S Quadrant are the people who work hard for the rich here in the right side of the Cash Flow Quadrant, for the Bs and Is.
Where Should You Fall?
So, early on in my life it was my poor dad who always said to me, “You know Robert, go to school, get a high paying job…” And so my poor dad’s core value was to be an employee. He wanted a job security, promotions, steady pay check and all these.
And so it was my rich dad who said to me, “You know, Robert, if you really want to be rich, learn to build businesses.” It made more sense to him to work hard to build a business. Something you own, and something you pass on from generation to generation to your kids.
Whereas my poor dad said, “work hard…” But my rich dad said, “Why would you work hard for something you’ll never own, and you can get fired from it right away?” Again, that was the difference of values.
The Unforgettable Tool
So my rich dad suggested I learn how to be a business owner and learn how to be an investor. And that’s where the big difference is. On the left side of the Cash Flow Quadrant, these people work for security, they work for money also.
On the right side of the Cash flow Quadrant the B and I people’s key value, what they want is they want Freedom, financial liberty. They don’t want to have to work in a job anymore. They don&rquo;t want to have to work for the rest of their lives. You work hard for a few years and possibly for the rest of your life that passive income keeps flowing to you.”
From 1960 to 2000 the value of the dollar has declined steadily. When you take a look at this 40-year run on the dollar, the dollar is designed economically to lose money every single year. So, why would you save something that loses money every year? And what does this mean for you or for somebody on the retirement plans, if the value of the dollar goes down and your cost of living keeps going up after you retire? To my rich dad that was bad advice and made no sense. Again different values.
The Role of Network Marketing
This Cash Flow Quadrant applies to the Network Marketing System. Robert Kiyosaki explains why:
“I’m often asked why I recommend multi-level-marketing, especially when I’m not in network marketing business myself. I&rsquom like many people, early on, I had a very negative or close-minded attitude toward network marketing system. But I’ve changed my mind. I’ve opened up the way to think, and I looked into the network marketing industry. And I found some things that are extremely beneficial, especially for those people who look for changes from E and S to B and I in the Cash Flow Quadrant. Communications and sales skills are essential for somebody in the B Quadrant. And network marketing companies, not all of them but some of them, have excellent training program that will teach you how to sell, how to communicate, how to build businesses… Many people would not go to the B Quadrant because they are afraid of rejection. Multi level marketing teaches you how to handle your own fears, fear of rejection, and build that self-confidence. That’s essential for the B Quadrant.”