Robert's View

Once you understand leverage, which is the ability to do more with less, you will probably begin to see leverage everywhere. For example, the chair I am sitting in is a form of leverage. It would be tough for me to sit on the ground and type with ease. Having partners is leverage. At The Rich Dad Company, I combine my talents with Kim's and Sharon's talents, which gives me much more leverage than working on my own. Using strategic partners creates leverage and is often called OPR, other people's resources. We use strategic partners to help us in several areas of our business, for instance we use a strategic partner to distribute our books so we do not have to build that capability inside Rich Dad. The important message is: Rich people use more leverage than poor people. If you want to be rich, you need leverage. If you want to be really rich, you need a lot of leverage.

In the CASHFLOW Quadrant, the E and S side of the quadrant usually has very little leverage. Both the E and the S quadrants involve you doing the work by yourself. The B and I side is nothing but leverage -- other people's money and time.

Leverage can come in many forms. Leverage can be your thoughts. People who win are careful with their thoughts. They don't think to themselves, "I can't do that." Or, "It's too risky." Or, "I can't afford it." Instead, they think, "How can I do that?" Or, "How can I reduce my risk?" Or, "How can I afford it?" People who invest to win are also very careful about whom they take financial advice from. Just as Olympic athletes carefully choose which foods they put in their bodies, investors who invest to win need to carefully choose which advice they put in their heads. Sometimes, it may require clearing your mind of old thoughts. For much of my life, my mind staged a running battle between what my poor dad taught me about money and what my rich dad taught me about money.

The Power of Control

In addition to wanting leverage, investors who invest to win want control. People think investing is risky simply because they have no control.

I like business and real estate because I have control. I do not like paper assets such as stocks, bonds and mutual funds because I do not have control. Most people who think investing is risky invest in paper assets and have no control. Is that you?

Those of you who have seen my television show on PBS are familiar with the car metaphor I use. On the show, I have a mock-up of a car to demonstrate the importance of controls. On the car, I have:

1. Steering wheel
2. Brakes
3. Gas pedal
4. Gear shift
5. Driver's license
6. Insurance

Using the car as an example and a metaphor for investing, I ask the audience if they would drive a car without any one of these six factors. For example, if you got in a car and it did not have a steering wheel, would you drive the car?

Obviously, the answer is "No." Why? We all know: Because driving the car would be too risky without the control of a steering wheel.